What does COGS mean in ACCOUNTING
COGS (Cost Of Goods Sold) is an accounting term that describes the expenses associated with producing and selling a product or service. It includes the cost of raw materials, labor, shipping, production costs and any other related expenditures. By tracking COGS, companies can determine their gross profit margin and have a better understanding of their profitability.
COGS meaning in Accounting in Business
COGS mostly used in an acronym Accounting in Category Business that means Cost Of Goods Sold
Shorthand: COGS,
Full Form: Cost Of Goods Sold
For more information of "Cost Of Goods Sold", see the section below.
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Definition
COGS is the sum of all direct costs incurred in producing and selling a product or service. This includes raw material fees, labor costs, factory overhead, shipping charges, packaging fees, and other related expenditures.
Advantages
Tracking COGS allows companies to gain insight into their overall profits and identify areas where cost savings can be made. It also enables them to better understand pricing strategies by evaluating how much it costs to provide a certain service or produce a specific product. Additionally, it helps businesses set realistic prices for products or services while still achieving desired profit margins.
Essential Questions and Answers on Cost Of Goods Sold in "BUSINESS»ACCOUNTING"
What is Cost Of Goods Sold (COGS)?
COGS is the amount a business spends to produce and deliver a good or service to its customers. This includes the cost of materials, labor, shipping and other costs directly related to producing the goods. It does not include indirect costs such as depreciation or administrative expenses.
How do I calculate Cost Of Goods Sold (COGS)?
You can calculate COGS by beginning with your opening inventory balance, adding purchases and other manufacturing costs throughout the year, and then subtracting your ending inventory balance.
What expenses are included in Cost Of Goods Sold (COGS)?
Expenses typically included in COGS are the cost of raw materials purchased to make a product, direct labor expenses such as wages paid to employees who directly contribute to building a product, and factory overhead costs like utilities used in production.
Why do companies need to track Cost Of Goods Sold (COGS)?
Companies need to track COGS in order to properly calculate their company's gross profit. Gross profit is total revenue minus total COGS for a given period of time and helps businesses measure their success as well as their progress toward meeting goals.
What types of businesses track Cost Of Goods Sold (COGS)?
Any type of business that sells physical goods must keep track of its COGS in order to calculate gross profit correctly. This applies especially to retail stores, manufacturers, wholesalers, distributors and ecommerce platforms selling tangible items like products or food items.
Does inventory count as part of Cost Of Goods Sold (COGS)?
Inventory is not part of the calculation for COGS since it only refers to goods already sold during the accounting period being analyzed. However, when calculating COGS you should begin with your opening inventory balance and then subtract your ending inventory balance from purchases made during that period.
Are taxes included in Cost Of Goods Sold (COGS)?
Generally speaking no, taxes are not included in calculating COGS since they don't represent an expense related directly to producing a good or service. Instead taxes are usually considered operating expenses which means they are accounted for separately from COGS on financial statements.
Can you deduct Cost Of Goods Sold (COGS) from taxes?
Yes, businesses can deduct their total COGs for an accounting period from income earned during that same period before calculating taxable profits for tax purposes on their reports filed with the IRS or other tax authorities.
Final Words:
COGS is an important tool for businesses to track when assessing overall profitability throughout its operations. It allows them to identify opportunities for cost reductions while maintaining desired profit margins on products or services being offered. Keeping accurate records of COGS can help businesses develop effective pricing strategies resulting in greater financial success over time.
COGS also stands for: |
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| All stands for COGS |