Cost Of Goods Sold (COGS) is an accounting term used to describe the total cost of producing, acquiring or manufacturing the goods that a company sells. This cost includes raw materials, labor costs, shipping and handling fees and other expenses directly attributed to the production of merchandise sold. It’s important to properly account for COGS in order to accurately gauge a company’s profitability. By looking at how much it costs to produce your goods compared to how much you make from selling them, you can understand if you’re staying afloat or not. Keeping an accurate and up-to-date COGS balance sheet is key to understanding your business’s financial health.