Cost of Goods Sold

Moving down the income statement, the next piece of information presented is an amount for cost of goods sold (COGS). For obvious reasons, companies that do not actually sell goods generally use another term, such as “cost of revenues” or “cost of sales.” (For the sake of simplicity, we’ll refer to all these concepts as COGS.)

Regardless of which term the income sheet uses, the number shown reflects the direct cost to the company to produce the goods or services it sold during the period. The COGS figure incorporates such costs as the cost of labor and the cost of materials (to turn into finished goods or to resell)