What are costs of sales?

Definition of costs of sales

Costs of sales are day-to-day running costs of a business that relate directly to particular individual sales the business makes.

Running costs that do not relate directly to individual sales are called 'overheads'.

Examples of costs of sales:

Examples of costs of sales would be: raw materials to make goods for sale, salaries for factory workers who are making goods for sale, and postage of finished goods.

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Businesses that sell the owner's own labour, as opposed to businesses that sell goods, may have few or no costs of sales.

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FreeAgent's Chief Accountant Emily Coltman is available to answer your questions in the comments.