Cost of revenue
In accounting, cost of revenue means the direct costs of producing the goods or delivering the services sold in the period — the line gross profit is measured after.
- Layer
- Lexicon
- Defined in
- Lexicon
- Also called
- COGS
- Components
- 1
Authority
This definition follows Reg S-X 5-03.
Every citation in this system, with the text we read and the date we checked it, is in US GAAP and where these rules come from.
The lesson that teaches this
Accounting, 0 to 1 — a free course taught end to end on one month of one company, with the spreadsheet exercises to work it yourself.
Cost of revenue, in use
Quoted from the 2 documents that use the word — what it does to an interface, in the spec's own sentence.
Revenue → COGS → Gross profit → Operating expenses → Operating income → Other → Net income.
If the chart of accounts has no COGS, the component omits the gross profit subtotal rather than showing a gross margin equal to revenue, which is a lie by omission.
For founders
The same idea written for a founder: what it costs a startup that ignores it, and what to do in a real month.
- How to read an income statement (P&L)Revenue, cost of revenue, gross margin, operating expenses and net income, read line by line, on accrual basis, with the mistakes founders make most.
- Chart of accounts for startups: a starting templateA starting chart of accounts for a US startup: number ranges, the expense accounts you need, and when to add an account versus a class or tracking tag.
- How to reconcile Stripe payouts to your booksA Stripe payout is charges less fees, refunds and disputes, batched across days. How to book it gross, tie it to the bank, and keep revenue right.
What it is not called
Each of these is a real word for a different thing. Using it here is what makes a product read as though it was built by someone who has not done the work.
- expenses unqualified
- opex
Components that render this
The concept is not documentation-only. These are the components that name it in their specification, grouped and stated exactly as the catalog states them.
Components that render the terms it depends on
Little in the catalog names this concept outright, but its definition is built out of others that are named. These render revenue, period.
4Swaps & FX
Family spec5Ledger & tables
Family spec9Accounting core (GL)
Family spec10Receivables (AR)
Family spec11Payables (AP)
Family spec12Close, controls & consolidation
Family spec13Metrics & analysis
Family specTerms this one depends on
Also in Statements
Work with this concept
The calculators that compute it and the ledger payloads that carry it. A definition is where a reader starts; these are where they go next.
- Journal entry for a sale on accountFor a sale on credit, debit Accounts receivable and credit Revenue for the price; under a perpetual inventory system also debit Cost of goods sold and credit Inventory for what the goods cost. When the customer pays, debit Cash and credit Accounts receivable.Entry
- Journal entry for an inventory purchaseWhen inventory is bought on credit under a perpetual system, debit Inventory and credit Accounts payable. If an early-payment discount is taken, debit Accounts payable for the full bill, credit Cash for what is paid and credit Inventory for the discount.Entry
- Journal entry for an inventory write-downWhen inventory's net realizable value falls below its cost, debit an inventory write-down expense (often within cost of goods sold) and credit Inventory for the difference.Entry
Defined in Lexicon. This page is generated from that document, so the two cannot disagree.