Cost of sales: what you need to know for your business

Analyses the direct and indirect costs that a company incurs selling its goods/services.

Analyses the direct costs involved in the production of a company’s goods.

Presented on an income statement before the EBIT margin.*

Presented on an income statement beneath revenue (COGS is deducted from revenue to calculate gross profit).

Calculated to show the number of goods sold.

Calculated to show the number of goods a company manufactures.

Not tax-deductible.

Deducted from gross receipts. Claiming COGS reduces taxable income but can also lower profitability.