Cost of Goods Sold
The Accountant's Dictionary
Fri, Jun 19, 2026
Cost of goods sold is the direct cost of inventory or production consumed to deliver the goods a business sells.
What Cost of Goods Sold means in business operations
Cost of Goods Sold is explained here in the context of real finance, payroll, HR, and ERP workflows. This definition is written for business users who need practical understanding that supports implementation, reporting, approvals, reconciliation, and policy decisions.
If you are reviewing related concepts, continue to the The Accountant's Dictionary, browse ERP articles on the Eprecus blog, or explore the Eprecus ERP platform overview.
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Cost of Goods Sold
Cost of goods sold, often abbreviated as COGS, represents the direct cost associated with the products a business sells. It typically includes inventory purchase cost, freight-in, production input, and certain conversion costs depending on the business model.
Why it matters
COGS affects gross profit, pricing decisions, margin analysis, and inventory valuation.
How teams use it
Finance and inventory teams track COGS to understand profitability by item, category, customer channel, or business unit.
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