What is the exact difference between 'cost of sales' and 'COGS' in an income statement?



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Are these two terms totally different or is it just one way to call the other?

4 Answer(s)


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There is no difference between Cost of Goods Sold and Cost of Sales. Both these terms are used interchangeably to refer to the same thing - what are the various costs that go into the product that is being sold.

For example if your product is a Pizza, then your cost of sales/goods sold will include the ingredients such as a cheese, vegetables, meat, dough etc.

This youtube video explains this concept in detail -
http://www.youtube.com/watch?v=MBrPu-jVMFI

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What is included in COGS varies depending on the industry. In highly service oriented sectors employee salaries are often included in COGS.

Subtracting COGS from Revenue will give you the Gross Profit (Revenue-COGS). While analyzing companies this is a very important component, since this determines "flow-through" margins - how much money is left over to fund the conmpany's operations after the product manufacturing cost has been paid off.

Technology companies such as Google have very gross margins (70%+). Infrastructure companies such as Ford have low gross margins (<40%)

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When a company first buys raw materials, these are capitalized as inventories in the balance sheet. As and when this inventory is used to make the product and sold, the carrying price of this inventory is taken as COGS in the period when the product was sold.

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That expense is carriage inwards

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