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Financial Intelligence for Entrepreneurs: What You Really Need to Know About the Numbers by Joe Knight, Karen Berman

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6

Costs and Expenses

No Hard-and-Fast Rules

Most entrepreneurs watch expenses closely. But did you know that there are plenty of estimates and biases on those expense lines? Let’s examine the major line items.

COST OF GOODS SOLD OR COST OF SERVICES

As you probably do know, expenses on the income statement fall into two basic categories. The first is cost of goods sold, or COGS. As usual, there are a couple of different names for this category—in a service company, for instance, it may be called cost of services (COS). We’ve also frequently seen cost of revenue and cost of sales. (For simplicity’s sake, we’ll use the acronyms COGS or COS.) At any rate, what matters isn’t the label; it’s what’s included. The idea behind COGS is to measure all ...

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