Cost of Goods Sold Normal Balance

Q:

What is the normal balance of cost of goods sold?

A:

  Cost of goods sold (COGS) is considered an expense item on the income statement because it represents the direct costs to manufacture products or services that have been sold. Cost of goods sold has a normal balance of a debit because it is an expense. This means that cost of goods sold increases with a debit and decreases with a credit. Keep in mind that all expense accounts normally have a debit balance.

An example of a simplified journal entry for a sale of goods is as follows:

AccountsDebitCredit
Cost of Goods Soldxxx
Inventoryxxx