Difference Between Cost of Goods Sold And Cost of Services
Cost of Goods Sold or Cost of Sales is the direct cost of productio n and it is related to manufacturing / produci ng and selling of finis hed goods to ultimate customers. Cost of goods sold for tradi ng or merc ha ndise companies is calculated b y applyi ng t he b elow formula as show n b elow: Cost of Sales = Ope ning Inventory + Purc hases - Closi ng Inventory For Manufacturing companies we use t he followi ng formula: Cost of Sales = Cost of Goods Manufactured + Ope ning Finis h ed Inventory + Purchases - Closing Finis h ed Inventory Cost of services or cost of revenue is only calculated for services companies. It does not deal wit h cost of sales as it is concerned only wit h merc h andising or goods produced and traded w h ic h is not involved in a pure service b usi ness. Cost of revenue includes all the costs incurred in rendering the services to clients. Major examples of services companies include all professional firms suc h as Accounting Firm...