Cost of Goods Sold or COGs are expenses directly related to the service you provide or the product you sell. Example – If you own a restaurant, you must buy food to be in business. No food, no business. But Overhead Expenses are NOT related to labor, direct materials, or the production of your product or service. These are “fixed” costs. Ex Trash removal or rent. Example – If you own a restaurant and rent the building from someone, rent is due every month regardless of how much business you had that month.
What’s the difference between Cost of Goods Sold and Overhead Expenses for your business?
If your business uses accrual basis of accounting, you can