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COST OF GOODS SOLD STATEMENT. Financial Statements. Balance Sheet. Income Statement. Cost of Goods Sold is one of the basic component of Income Statement (Profit & Loss Account). Cost of Goods Sold (CGS).

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Financial Statements

Balance Sheet

Income Statement

Cost of Goods Sold is one of the basic component of Income Statement (Profit & Loss Account)

cost of goods sold cgs
Cost of Goods Sold (CGS)
  • Cost of Goods Sold represents the expense a business incurs to manufacture or by a product for sale.
  • In Income Statement (P&L Account), CGS is shown in one figure.
  • However, for internal uses, additional information is necessary for future planning and for evaluation of past.
cost of goods sold cgs1
Cost of Goods Sold (CGS)
  • The cost of goods sold section of any manufacturing business can be divided into 5 distinct parts:
    • Direct Materials Section
    • Direct Labor Section
    • Factory Overhead (FOH)
    • Work-in-process Inventories
    • Finished Goods Inventories
cost of goods sold cgs2
Cost of Goods Sold (CGS)
  • Direct Materials
    • Beginning/Opening Inventory
    • Purchases (Net)
    • Ending/Closing Inventory
cost of goods sold cgs3
Cost of Goods Sold (CGS)
  • Direct Labor
    • Cost of those employees whose work can be identified directly with the product manufactured
    • No inventories involved
cost of goods sold cgs4
Cost of Goods Sold (CGS)
  • Factory Overhead (FOH)
    • All those costs that assist in an indirect manner in the manufacturing of the product.
    • No inventories involved
cost of goods sold cgs5
Cost of Goods Sold (CGS)
  • Work in Process (WIP) Inventories
    • Cost in process at the beginning of accounting period and costs still in process at the end of the period.
    • Opening WIP Inventories
    • Closing WIP Inventories
cost of goods sold cgs6
Cost of Goods Sold (CGS)
  • Finished Goods Inventories
    • Opening Finished Goods Inventories
    • Closing Finished Goods Inventories