Where is the cost of goods sold displayed in financial statements?

The cost of goods sold (COGS) is displayed in the income statement before gross profit because it represents the direct costs attributable to the production of the goods sold by a company during a specific period. This figure is crucial for calculating gross profit, which is derived by subtracting COGS from total sales revenue. By presenting COGS before gross profit, the income statement clearly outlines the costs associated with generating revenue, allowing stakeholders to assess the company's profitability and efficiency in managing production costs.

The structure of the income statement is designed to show revenues at the top, followed by COGS, which leads to gross profit. This order provides a clear, logical flow of information that helps users of financial statements understand how much profit is being made from core business operations before accounting for other expenses.