Definition of Cost of Goods Sold (COGS)
The Cost of Goods Sold is an income statement figure which reflects the cost of obtaining raw materials and producing finished goods that are sold to consumers during the period - i.e. the cost of inventory sold during the period. Cost of Goods Sold = Beginning Merchandise Inventory + Net Purchases of Merchandise - Ending Merchandise Inventory. In standard accounting practices, gross margin can be calculated by subtracting the Cost of Goods Sold from Total Sales.