Cost of goods sold

Cost of goods sold (COGS) is the total cost directly incurred by a company to sell their goods or services. In manufacturing, the cost of goods sold is also known as the cost of goods manufactured (COGM).

The cost of goods sold is reported on the income statement when the sales revenues of the goods sold are reported.

Raw material expenses refer to the cost of the components that go into a final manufactured product. They are one of three expenses included in a manufacturer’s cost of goods sold (COGS). The other two are: labor expenses and amortization expenses.

Three elements are needed to compute the cost of goods sold:
*Beginning inventory
*Net delivered cost of purchases
*Ending inventory

The process of calculating the cost of goods sold starts with inventory at the beginning of the year and ends with inventory at the end of the year. Many businesses have a process of "taking inventory" at these times to determine the value of their inventory.
Cost of goods sold