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Accounting · Definition

Cost of Goods Sold

The direct cost of the products a business sold in a period.

COGS is the direct cost attributable to the goods you sold — primarily the landed cost of inventory. It is subtracted from revenue to give gross profit.

Accurate COGS depends on accurate inventory valuation, which is why landed cost and stock accuracy matter to the income statement.

How it is calculated

COGS = Opening inventory + Purchases − Closing inventory

For a period, using your chosen valuation method.

See it in AWRA OpsHub

Accounting Insights

Related terms

Landed Cost

The total cost of a product once it arrives, including freight, duties and fees.

Unit Cost

The total cost attributable to producing or acquiring one unit.

Gross Margin

The percentage of revenue left after the cost of goods sold.

Inventory Turnover

How many times inventory is sold and replaced over a period.

More in Accounting

Accounts Payable (AP) Accounts Receivable (AR) Accrual Accounting Accrued Expense Aging Report Bad Debt Provision Balance Sheet Bank Reconciliation

Cost of Goods Sold is not just a definition here

Accounting runs on this vocabulary every day in AWRA OpsHub — 51 of our 257 glossary terms describe things the platform actually does.

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