How to Calculate Cost of Goods Sold

Cost of goods sold also known as cost of sales is an important term which is often used while calculating ratios. Cost of goods sold can be calculated in two ways –

One way of calculating COGS is, Cost of Goods Sold = Opening Stock + Direct Expenses + Net Purchase – Closing stock

Another way of calculating COGS is, Cost of Goods Sold = Net Sales – Gross Profit

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