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If you own an auto service shop and sell brake jobs, then you’ll really be confused now (or at least I was until I understood the accounting principles behind these equations). Not only do we have sales, but we have cost of sales, and cost of inventory. So where’s the expense? What about labor? If you have to pay someone to perform those brake jobs, that’s your expense and what you pay for those brakes to keep in inventory is your cost..
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