COGS Formula – True or False

Practice Question

Intro to Financial Accounting
Cost of Sales and Inventory Management
COGS
True or False

The cost of goods sold (COGS) is calculated by subtracting ending inventory from the cost of goods available for sale.

Answer +
Final Answer: TRUE
Explanation +

The formula for calculating COGS is: COGS = Cost of Goods Available for Sale – Ending Inventory.

This approach reflects the amount of inventory that has been sold during the period, and it's essential for accurately reporting expenses tied to revenue.