𝐓𝐡𝐞 𝐈𝐧𝐜𝐨𝐦𝐞 𝐒𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭 𝐬𝐞𝐜𝐭𝐢𝐨𝐧 𝐜𝐚𝐥𝐥𝐞𝐝 𝐂𝐨𝐬𝐭 𝐨𝐟 𝐆𝐨𝐨𝐝𝐬 𝐒𝐨𝐥𝐝 (𝐂𝐎𝐆𝐒) 𝐜𝐚𝐧 𝐛𝐞 𝐜𝐨𝐧𝐟𝐮𝐬𝐢𝐧𝐠 𝐭𝐨 𝐧𝐨𝐧-𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐚𝐧𝐭𝐬.

For construction contractors, COGS includes any costs that are associated with performance and completion of a project.

𝐈’𝐯𝐞 𝐧𝐨𝐭𝐢𝐜𝐞𝐝 𝐭𝐡𝐚𝐭 𝐦𝐚𝐧𝐲 𝐜𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐨𝐫𝐬 𝐚𝐫𝐞 𝐜𝐥𝐚𝐬𝐬𝐢𝐟𝐲𝐢𝐧𝐠 𝐜𝐨𝐬𝐭𝐬 𝐭𝐡𝐚𝐭 𝐰𝐨𝐮𝐥𝐝 𝐭𝐲𝐩𝐢𝐜𝐚𝐥𝐥𝐲 𝐛𝐞 𝐝𝐞𝐟𝐢𝐧𝐞𝐝 𝐚𝐬 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝 𝐢𝐧𝐭𝐨 𝐭𝐡𝐞 𝐂𝐎𝐆𝐒 𝐬𝐞𝐜𝐭𝐢𝐨𝐧 𝐨𝐟 𝐭𝐡𝐞 𝐏&𝐋 𝐬𝐭𝐚𝐭𝐞𝐦𝐞𝐧𝐭.

If you are unclear, ask yourself whether the expense would have emerged if the customer sales contract was not generated. If the answer is yes, I had to incur this expense because it had nothing to do with the sales contract, then this is not a COGS expense.

COGS are expenses directly related to the production of the product.

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