Accounting Dictionary

Cost of Goods Sold

Cost of Goods sold is the price you paid for inventory that was purchased by customers.

Let’s say a shoe store bought $10,000 worth of shoes and sold $4,000 of those shoes to customers. They also spent $2,000 for taxes and $6,000 for salaries. The cost of goods sold would be $4,000, the actual cost of the shoes the customers bought. Cost of Goods sold does not include the cost of the shoes that weren’t sold or other costs unrelated to actual product costs. Cost of Goods Sold is commonly abbreviated COGS.

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