How to Calculate Cost of Goods Sold?

Calculating the cost of goods sold, or COGS, is done in a few simple steps. Take the beginning inventory, add any inventory purchases that you made, and then subtract the ending inventory. So, if you start the period with a beginning inventory of 100, over the course of the period you purchase 70, and you end the period with 30 your equation will look like this: 100 + 70 – 30 = 140. Of course, the answers will differ depending on which type of inventory-valuation method is used, FIFO, LIFO, or Average Cost.