Average cost method

A physical count is then performed on the ending inventory to determine the number of goods left.

The cost of goods sold valuation is the amount of goods sold times the weighted average cost per unit.

The sum of these two amounts (less a rounding error) equals the total actual cost of all purchases and beginning inventory.

Similarly, the number of units bought is added to beginning inventory to get current goods available for sale.

This deducted amount is added to cost of goods sold.