Cost Of Goods Sold, or COGS. This video explains Cost Of Goods Sold in an easy to understand way. We will start off with some examples of Cost Of Goods Sold from the real world, discuss how COGS relates to gross profit and inventory, review the #COGS formula, and calculate Cost Of Goods Sold using both the FIFO and the LIFO methods.

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⏱TIMESTAMPS⏱
00:00 Introduction to COGS
00:25 COGS in the income statement
00:48 COGS example: Apple
01:35 Cost of revenue example: Facebook
01:55 COGS example: JNJ
02:20 COGS example: Walmart
03:05 Inventory, Cost Of Goods Sold and Gross Profit
04:21 Matching revenue and COGS
05:04 Cost Of Goods Sold journal entries
06:14 Cost of Goods Sold formula
06:39 Calculating COGS using FIFO and LIFO
09:57 COGS formula FIFO vs LIFO inventory methods

We can put the Cost Of Goods Sold formula side by side for FIFO and LIFO. Beginning inventory of $2400, plus purchases of zero, minus FIFO ending inventory of $2150, equals Cost of Goods Sold of $250. Beginning inventory of $2400, plus purchases of zero, minus LIFO ending inventory of $2050, equals Cost of Goods Sold of $350. The higher the ending inventory value, the lower the Cost Of Goods Sold. The lower the Cost Of Goods Sold, the higher the (taxable) profit. The lower the ending inventory value, the higher the Cost Of Goods Sold. The higher the Cost Of Goods Sold, the lower the (taxable) profit.

Cost Of Goods Sold, Gross Profit, and inventory. Remember to always take the same number of units into COGS as the number of units you have in revenue.

Suggestion for a related video to watch: what is gross profit    • What is gross profit  

Philip de Vroe (The Finance Storyteller) aims to make strategy, finance and #accounting enjoyable and easier to understand. Learn the business and accounting vocabulary to join the conversation with your CEO at your company. Understand how financial statements work in order to make better investing decisions. Philip delivers financetraining in various formats: YouTube videos, classroom sessions, webinars, and business simulations. Connect with me through Linked In!