Cost of Goods Sold

Definition of Cost of Goods Sold as it relates to Business, Accounting Principles, Financial Accounting, Financial Statements, Income Statement

Cost of Goods Sold (COGS) is an account within the Income Statement that represents the direct costs attributable to the production of goods sold by a business during a specific period. COGS includes expenses such as materials, direct labor, and overhead costs incurred in creating the products that were sold to customers. These expenses are subtracted from revenue to determine gross profit, making COGS a critical component of financial analysis for businesses engaged in manufacturing or selling physical goods. By tracking COGS over time, companies can identify trends, optimize production processes, and make informed decisions about pricing strategies.

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