Cost of Goods Sold

The cost incurred in purchasing goods or services to sell them and generate revenue is called as the cost of goods sold. The account that is used track this cost is named as the Cost of Goods Sold account.

Formula: Cost of Goods Sold = Sales Revenue – Gross Profit

For example, a stationery shop purchases 1000 pens and sells 200 of them. Now, the cost of the 200 units of pen will be the cost of goods sold for the stationery shop.

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Related Terms

• Credit
• Cost of Goods Sold
• Closing Balance
• Contract
• Capital or Equity
• Cash Basis Accounting
• Chart of Accounts (COA)
• Credit Note
• Cash Flow
• Contra Entries
• Consignment
• Current Ratio
• Current Asset