Cost of Goods Sold

Cost of Goods Sold or COGS is the direct expense a company incurs in making a product or supplying a service such as raw materials and labor.  Cost of goods sold is also referred to as the Cost of Sales.  The costs of goods sold do not include indirect expenses such as administrative or selling expense.  If a company keeps an inventory or product or raw materials, the cost of goods sold needs to account for changes to beginning and ending inventories;

The cost of goods sold is calculated:

Starting Inventory + Additions = Goods Available for Sale

Goods Available - Ending Inventory = Cost of Goods Sold

The cost of good sold appears on the income statement of a company.