The cost of merchandise sold is the cost of goods that have been sold by a wholesaler or retailer. These entities do not manufacture their own goods, instead buying the goods from third parties and selling them to their customers. If wholesalers and retailers were to instead manufactured their own goods, this term would change to the cost of goods sold.
The calculation of the cost of merchandise sold is to add the beginning inventory balance to merchandise purchases during the period, and subtract out the ending inventory balance. Thus, the calculation is:
Beginning merchandise inventory + Merchandise purchases - Ending merchandise inventory
= Cost of merchandise sold
There are several factors that can influence this cost. If there are purchase discounts, allowances, or freight costs, these items are added to the merchandise purchases amount.