Cost of goods sold
Financial Accounting glossary · Assets: Cash, Receivables, Inventory, PP&E & Intangibles
Definition
Direct costs of producing goods that have been sold; expensed when revenue is recognized.
Cost of goods sold in plain English
Cost of goods sold (COGS) is what it actually cost the company to make or buy the specific items it sold — the ingredients and direct labor baked into those exact products. If you run a cookie stand and sell a box, COGS is the flour, sugar, and chocolate that went into that box, not your ad flyers or rent. Here's the clever timing part: you only count this cost at the moment you record the sale, so the expense lines up perfectly with the revenue it earned. That matching is what lets you see the true profit on each sale.
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