How to determine the cost of goods sold?

You determine the cost of goods sold by taking the value of inventory at the beginning of a specific period, adding the cost of any new inventory purchased during that time period, and then subtracting the value of inventory held at the end of the time period.

Basically, the formula for determining the cost of goods sold (COGS) is starting inventory plus purchases minus ending inventory. COGS represents the expenses involved in producing the goods sold over a specific period of time. This period of time can be a month, a quarter, a year, or any other specific time period that a company is interested in looking at.