Does cost of goods count as an expense?

Is the cost of goods, like, an expense? You bet it is! Cost of Goods Sold (COGS), that’s what they call it, is definitely an expense. It’s right there on the income statement – a whole line item just for it. They subtract it from your revenue to figure out your gross profit. See? Makes sense, right? You sell something for $20, it cost you $10 to make, your profit is $10. Where would that $10 cost go if it wasn’t an expense? Think about it!

Now, the thing is, you won’t see COGS itself on the balance sheet. That tripped me up for a while, I’ll be honest. But the inventory, you know, the actual stuff you’re selling, that’s a current asset on the balance sheet. So, say you bought a bunch of t-shirts to sell, those t-shirts are inventory on your balance sheet. Then, when you sell them, the cost of those specific t-shirts becomes part of COGS on your income statement. It’s kind of like a before-and-after picture, you know? I remember when I was first starting my little Etsy shop selling handmade jewelry, understanding this difference between COGS and inventory was a real “aha!” moment. Suddenly all those numbers started making a lot more sense. It’s like, duh, of course! So, yeah, COGS is totally an expense, just not directly on the balance sheet, if that makes sense.