The question of how to calculate the Cost of Goods Sold (COGS) is a frequent inquiry among sellers, and as an accounting professional, I’m here to demystify it for you. In this guide, you’ll find a comprehensive explanation, the core equation, and even a downloadable calculator – all designed to simplify the COGS calculation process.

When you engage a CPA during tax season, they’ll inevitably request your Inventory Beginning and Ending balances, along with the total inventory purchases for the year. Why? Because they need these figures to compute your COGS accurately.

The trickiest part of the COGS equation lies in obtaining the precise numbers for inventory and purchases. While my Coaching services can guide you through this process, let’s assume you already have these amounts at your disposal for the purpose of this quick tip.

Here’s the fundamental equation: COGS = Beginning Inventory + Purchases – Ending Inventory

For a more hands-on experience, I’ve prepared a FREE COGS Calculator to streamline the process. Here’s a quick breakdown of the terms involved:

  • Beginning Inventory: The total inventory cost on day one of the accounting year.
  • Ending Inventory: The total inventory cost on the last day of the accounting year.
  • Purchases: The overall cost of all inventory acquired between the Beginning and Ending totals.

Feel free to leverage this valuable resource to ease the COGS calculation journey. Whether you’re a seasoned seller or just starting, mastering the COGS process is a crucial step toward financial clarity in your business.