Cost of goods sold
Cost of goods sold (alternatively known as cost of sales or by its acronym; hereinafter, COGS) is a monetary value of costs that are associated with a particular sale or group of sales. COGS may be calculated using one or more methods and include historical costs, freight charges, storage costs, associated direct labor, production expenses, and depreciation.
Contents
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Cost of goods sold. Total cost of the goods which were sold to customers.
Components
Costs of the sold products, used raw materials, and allocated expenses may include from one to all of the following:
- Historical costs.
- Freight, shipping, and/or other service charges.
- The cost of storage and handling.
- Direct labor costs for workers who produced the sold products.
- Production expenses.
- Depreciation.
Methods used to value inventory
- Main wikipage: Inventory valuing
- Specific invoice method. Valuing of inventory where each item is identified with a specific invoice.
- FIFO (first-in, first-out method) Valuing of inventory assuming that the company sells the first goods received in the store.
- LIFO (last-in, first-out method). Valuing of inventory with the assumption the last goods received in the store are the first to be sold.
- Weighted-average method. Valuing of inventory where each item is assigned the same unit cost. This unit cost is found by dividing the cost of goods available for sale by the total number of units for sale.
Related concepts
- Accounting (alternatively known as accountancy) is management of financial data, information, and knowledge about financial transactions of legal entities. Accountancy tends to include bookkeeping and, depending on a particilar enterprise, may also include quatitative analysis of financial data in the bookkeeping system and/or business intelligence.
