So at this point we have a general idea of the account cost of goods sold which is an expense related to the sale of inventory. How are we going to factor that into an income statement? Well it's going to get its own separate line before listing "period" costs. Cost of goods sold expense will be deducted from net sales to get our "gross margin" or our "gross profit." This term is a way of saying FATTY profit or profit before subtracting all expenses other than inventory expenses!
We go through the preparation of this ubiquitous statement, so give it a watch so that you'll be able to prepare one on your next test/quiz!