Q: Can you please re explain how an asset converts to an expense at Point of Sale.
A: When a business purchases products for resale, such as shoes for resale at a retail store, these products are initially classified as inventory, an asset account on the balance sheet. However, once the business sells a pair of shoes, the original cost of the shoes becomes an expense included in the price of the sale and reflected in Cost of Goods Sold on the income statement. At that point, the original cost of the shoes is deducted from the inventory (asset) account on the balance sheet and is transferred to the Cost of Goods Sold (expense) account on the income statement.
Course overview: Financial Statement Structure and Composition