Cost of Goods Sold (COGS)

COGS is the direct cost attributable to goods sold during a period.

COGS includes purchase cost, direct labor, and other direct costs, and it is deducted from revenue to determine gross profit.

- Used in day-to-day bookkeeping and journal entries to record transactions correctly.
- Used when preparing trial balances and reconciling accounts.

- Example: Accountants use **Cost of Goods Sold (COGS)** when recording transactions and preparing the trial balance.

- Why it matters: Ensures accurate records, supports reliable reporting, and reduces posting and reconciliation errors.