example, the COGS for an automaker would include the material costs for the parts that go into making the car along with the labor costs used to put the car together. The cost of sending the cars to dealerships and the cost of the labor used to sell the car would be excluded” (Investopedia, 2016). There are many ways to calculate the Cost of goods sold but the most common basic way is to use the beginning inventory for the accounting period and add the total amount of purchases made and then subtract the ending inventory from that amount. It’s all about taking small pieces and putting them together which is what accounting is all about. Beginning Inventory+ Inventory Purchases- End Inventory= Cost of Goods Sold. “We then assume that, if an item isn’t in inventory at the end of the period, it must have been sold. (And conversely, if an item is in ending inventory, it obviously wasn’t sold, hence the subtraction of the ending inventory balance when calculating CoGS)” (Obvious Investor, N.D).