What is COGS?
SHORT ANSWER
COGS (cost of goods sold) is what the items you actually sold cost you — not what you spent on inventory during the period.
COGS follows the sale. Inventory sitting in your building is an asset on the balance sheet; it becomes COGS the month it sells.
For resale, COGS should include the purchase price plus the costs of getting the unit sellable: freight, fuel, parts, disposal of what was unsellable.
For example
You bought $30,000 of inventory but sold units that cost $10,800. COGS for the month is $10,800.
Why it matters
Every margin number you rely on is COGS subtracted from revenue. Get COGS wrong and nothing downstream is real.
The mistake to avoid
Expensing a whole truckload the month you buy it, which makes buying months look catastrophic and selling months look brilliant.
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LAST UPDATED 2026-09-16 · REVIEWED BY REGISTIX OPERATIONS TEAM