Which statement best describes cost of goods sold?
A) Cost of goods sold is the total product cost on the balance sheet.
B) Cost of goods sold is a cost that should generally be more than the revenue.
C) Cost of goods sold is the total product cost for the units sold during a period.
D) Cost of goods sold is generally recorded as soon as products are manufactured.

Question

Quizplus · Accepted Answer

Cost of goods sold is the total product cost for the units sold during a period, which is an expense on the income statement. It represents the cost of resources used by a company to produce the goods sold, including materials, labor, and overhead. The balance sheet will show the inventory cost of the goods that haven't been sold yet. Therefore, option A is incorrect. Option B is a misconception as the revenue should always be more than the cost of goods sold to generate a profit, otherwise, the company would be running at a loss, and option D is incorrect since the cost of goods sold is recorded when the products are sold, not when they are manufactured.

Which Statement Best Describes Cost of Goods Sold