Cost of Goods Sold (COGS)
Also called: COGS, Cost of Sales
The direct cost of producing or acquiring the goods a business sells, reported as a deduction from gross revenue on Schedule C.
COGS = Beginning Inventory + Purchases - Ending Inventory
Full definition
COGS is the direct-cost line for anyone selling physical products — Etsy sellers, home bakers, market vendors, custom apparel makers. It includes materials, direct labor, and freight-in. Solo operators frequently misclassify overhead as COGS or vice versa. The IRS Schedule C Part III walks through the calculation: beginning inventory + purchases - ending inventory = COGS. Bookkeeping systems for product-based businesses should track materials cost per SKU and reconcile inventory quarterly.
Used for
- product-based business bookkeeping
- Etsy seller tax filing
- handmade business margins
Sources
Free to reference or cite in research and articles. Preferred citation: https://sailsandshore.com/glossary/cogs