In financial accounting, what does COGS stand for?

• A. Cost of General Supplies
• B. Cost of Goods Sold
• C. Credit on Gross Sales
• D. Cash on Goods Shipped

Answer: (B)

Verified step by step guidance

1. COGS stands for 'Cost of Goods Sold,' which is a key financial accounting term.
2. It represents the direct costs incurred in producing goods that are sold by a company during a specific period.
3. COGS includes expenses such as raw materials, direct labor, and manufacturing overhead directly tied to production.
4. It is calculated using the formula: $\mathrm{COGS}=\mathrm{Beginning\; Inventory}+\mathrm{Purchases}-\mathrm{Ending\; Inventory}$.
5. Understanding COGS is essential for determining gross profit, which is calculated as: $\mathrm{Gross\; Profit}=\mathrm{Net\; Sales}-\mathrm{COGS}$.