Cost of Goods Sold: debit or credit?
Cost of Goods Sold increases on the debit side and decreases on the credit side: its normal balance is a debit.
Expenses reduce equity through the costs of running the business. They increase with a debit.
Name in each convention
Account names and codes follow each convention; an account that does not exist in a convention is not offered there.
| Convention | Account |
|---|---|
| United States (US textbooks) | Cost of Goods Sold |
| Spain (PGC 2007) | — |
| France (PCG 2025) | — |
| Germany (generic accounts) | — |
Practice entries that use this account
- Cash sale with cost of goods sold (perpetual inventory)
- Sale on account with cost of goods sold
- Customer returns goods for a cash refund, restocked (perpetual inventory)
- Selling merchandise on account with sales tax
- Cash sales with sales tax included in the total
- Sale paid partly in cash, partly on account
- Recording inventory shrinkage at year end
- Recording the month’s cost of goods sold in one entry
- Period-end cost of goods sold under the periodic system
- Writing inventory down to net realizable value
- Recording an inventory count surplus