An expense is a cost that is incurred in order to generate revenue. A cost of goods sold (COGS) is a direct cost incurred in the production of the goods or services that were sold. In other words, COGS includes all of the direct costs associated with manufacturing a product or providing a service.
The main difference between an expense and COGS is that an expense can be either a direct or an indirect cost, while COGS can only be a direct cost. For example, if a company manufactures widgets, the direct costs associated with producing those widgets would be included in the COGS calculation. Indirect costs, such as marketing and administrative expenses, would not be included in the COGS calculation.
Another key difference between expenses and COGS is that expenses are reported on the income statement after revenue has been deducted, while COGS is reported on the income statement before revenue is deducted. This means that expenses are subtracted from revenue to calculate net income, while COGS is subtracted from revenue to calculate gross profit.