How to Calculate Cost of Goods Sold (COGS): Formula, Steps, and Practical Example

To calculate cost of goods sold (COGS), add beginning inventory to net purchases and directly attributable purchasing costs, then subtract ending inventory. The result represents the cost of products sold during the period, not the total value of goods purchased.

For example, beginning inventory of 10,000 plus net purchases and related costs of 30,000 minus ending inventory of 12,000 equals COGS of 28,000. Review stock counts, purchase returns, freight costs, and inventory valuation methods to ensure accuracy. Try Cash Cloud for free to explore purchasing, inventory, sales, and accounting tools.