Mohamed Samir Rashed

CMA , IFRSDIP

COGS
VS
COST OF SALES
The difference between cost of
goods sold and cost of sales

While some companies list either COGS or cost

of sales on their balance sheets, some include
both terms. Since they're often used
interchangeably, it can create confusion as to
how they truly differ.
While both include all direct costs used for a
company’s goods and services, here are some
differences that set them apart:
 Analysis
Cost of sales analyzes the direct and
indirect costs related to a company's
sale of its goods and services, while
COGS analyzes the direct costs
associated with the production of a
company's goods.
 Income statement
location
Cost of sales is included before the
EBIT margin (the operating earnings
over operating sales) on an income
statement. COGS is listed after
revenue, as it includes all direct
costs associated with revenue
generation.
 Amount
Since cost of sales includes
additional costs and COGS focuses on
a company’s direct costs, when both
are used, the COGS is always less
than the cost of sales.
 Calculation
Whereas the calculation for cost of
sales reflects the number of goods
sold, the calculation for COGS
reflects the number of goods a
company manufactures.
 Tax deduction
While cost of sales isn’t tax-
deductible, you can deduct COGS
from a company’s gross receipts to
determine a business’ yearly gross
profit. Claiming COGS and other
business expenses can increase a
company’s tax deductions while
lowering business profit.
 Mohamed Samir Rashed
CMA , IFRSDIP

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Mohamed Samir CMA , DIPIFR

@MohamedSamirRa
Mohamed Samir Rashed