Cost of Goods Sold
Definition: The direct costs attributable to the production or purchase of goods sold by a company during a period. Includes materials, direct labor, and alloc…
Very BroadEasy
The direct costs attributable to the production or purchase of goods sold by a company during a period. Includes materials, direct labor, and allocated manufacturing overhead. COGS = Beginning Inventory + Purchases − Ending Inventory.
Common Journal Entries
| Account | Debit | Credit |
|---|---|---|
| 1. Record COGS (perpetual) | ||
| Sell goods costing $3,500. | ||
| Cost of Goods Sold | $3,500 | |
| Merchandise Inventory | $3,500 | |
| Expense recognized when sale occurs (perpetual system). | ||
| 2. Record sale (revenue side) | ||
| Same sale at $5,200 selling price. | ||
| Accounts Receivable | $5,200 | |
| Sales Revenue | $5,200 | |
| Both entries recorded simultaneously. Gross profit = $1,700. | ||
Related Subjects
Used in Formula
- Gross Profit MarginUsed in: Gross Profit Margin
- Inventory TurnoverUsed in: Inventory Turnover
- Payable TurnoverUsed in: Payable Turnover
See Also
- RevenueBoth part of Gross Profit Margin
External Links
- Cost of goods sold — Wikipedia