Cost of goods sold is the cost assigned to the products sold during an accounting period.
How it works in retail
For a retailer, it reflects the inventory cost associated with sales, using the applicable accounting method. It is different from the cash paid for all stock purchased during the period.
A retail example
A shop purchases 100 units but sells only 40. The cost assigned to the 40 sold units enters COGS; unsold units generally remain in inventory.
What to keep in mind
Inventory valuation, freight treatment and adjustments affect the figure. Use consistent accounting policies when comparing periods or calculating margins.
Sources & further reading
Examples are illustrative. Terminology and measurement conventions can vary by business and market.