Cost of goods sold

Okay kiddo, let me explain what cost of goods sold means in a very simple way.

Let's say you have a lemonade stand. To make lemonade, you need lemons, sugar, cups, and ice. These are the things you use to make your product - the lemonade. The cost of all these things put together is called the "cost of goods sold". So, when you sell your lemonade, you subtract the cost of the lemons, sugar, cups, and ice from the money you made selling the lemonade to figure out how much profit you made.

Just like your lemonade stand, businesses sell different products or services and they need to spend money on things like raw materials, parts, and labor to make their products. All of these costs are included in the "cost of goods sold".

Simply put, cost of goods sold is the cost of all the things a business needs to spend money on to make and sell their products or services.