What is the difference between cost of sales and trade paybles?

Answer 1

This is a pretty easy answer. When you buy goods, you receive an invoice from your supplier. When you record it in your bookkeeping, the total amount you will need to pay to your supplier is is considered a trade payable.

The cost of sales is really the net value of the goods / services you bought, and only occurs when you sell the things you bought (partly or in whole).

Let me give an example:

Suppose you buy 10 items, costing 5 EUR a piece. The applicable VAT rate = 20% (VAT = value added tax, but can also be a sales tax, for instance). You will receive an invoice of (10 items x 5 EUR/item x (1 + 20%) = 60 EUR). This 60 EUR is considered the trade payable.

Next, you sell 5 items in a given month. You bought them for 5 EUR a piece, so your cost of sales will be 25 EUR.

Remark: if you sell all the items you bought, your cost of sales will equal the net amount of the invoice, exclusive sales tax / value added tax, i.e.: 10 items x 5 EUR a piece = 50 EUR.

In general: The trade payable expresses the amount of money you owe your suppliers, while cost of sales expresses the amount of purchases relating to the sales you have.