Do you know this accounting term?
The Cost of Goods Sold (COGS) is an important component of a company’s income statement since it’s used to calculate the gross profit. The COGS amount includes purchases directly related to making the product (e.g. raw materials). COGS does not include expenses like salaries, advertising, or distribution.
For each reporting period, the basic formulas are:
COGS = Beginning inventory + Purchases + Direct Costs - Ending inventory
Gross profit = Sales revenue - COGS
