Cost of Goods Sold in QuickBooks

The Cost of Goods Sold account is for costs directly related to producing a service or good for sale. There is a direct relationship between these costs and your revenue. If your company sells a product, your cost of goods sold (COGS) expenses would be the material, labor, and other costs incurred to make and sell the product. By contrast, your office expenses for rent or advertising are considered indirect and should not be posted to the Cost of Goods Sold account type.

Here’s a tip from Laura Madeira’s QuickBooks 2013 In Depth:

When you are creating your Cost of Goods Sold accounts, consider using summary accounts, such as material, labor, and subcontract, and letting your Item List track more detail. For example, if you are a construction company and you have expenses for site work, concrete, framing, painting, and so on, rather than having a Cost of Goods Sold account for each trade, use the Item List for these. For more details, see the section in Laura Madeira’s QuickBooks 2013 In Depth titled  “Adding an Item.” Reports by item are available to break down the total of Cost of Goods Sold account into more detail.

From Laura Madeira’s QuickBooks 2013 In Depth