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Cost of Sales

What is cost of sales?

Cost of sales definition - Cost of sales (also known as cost of goods sold) refers to the cost required to manufacture or purchase a product that is then sold to a customer.

Essentially, the cost of sales refers to what the seller has to pay in order to create the product and get it into the hands of a paying customer.

What is cost of sales used for?

Many companies that sell goods use cost of sales to accurately calculate their gross margin. The money spent to initially create or purchase the product is compared against the money earned at the final transaction. The difference is the gross margin.

Q&A

Question: How to calculate the cost of sales?
Answer: The basic formula for cost of sales is simple: Beginning inventory + Additions to inventory - ending inventory. It is very important that you keep up with costs at all times. Alternatively, there are many tools online to help.
Question: What is included in the cost of sales?
Answer: Cost of sales is essential for all the costs involved with selling a product. As a seller, this is how much it costs you to sell that product.
Question: What is the difference between cost of sales and cost of goods sold?
Answer: There are no differences between cost of sales and cost of goods sold. Only the name is different.

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