Which account is directly affected by the Cost of Goods Sold calculation?

The Cost of Goods Sold (COGS) calculation directly affects the inventory account. COGS represents the direct costs attributable to the production of goods that a company sells. When goods are sold, their cost is moved from inventory to COGS on the income statement, thereby decreasing the inventory account. This reflects the reduction of available stock as items are sold, effectively capturing the expenditures related to those sold goods.

In addition, understanding this relationship clarifies why the other accounts aren't directly impacted in the same immediate way. Equity accounts typically reflect the net income after COGS has been deducted from the revenue, but they are not directly affected by the calculation itself. Asset accounts include various types of resources a company owns, but the change in inventory is what influences these accounts rather than a direct change in all asset accounts. Liability accounts represent obligations that a company owes and are not influenced by sales or inventory transactions directly related to COGS. Thus, the inventory account is the primary account impacted by the Cost of Goods Sold calculation.