Cost of Goods Sold

COGS is matched to what was sold, not to what was produced, which is why the inventory adjustment sits in the formula — goods made but unsold stay on the balance sheet rather than hitting this line. That mechanism is also how a company can inflate profit by overproducing, since fixed costs get capitalised into inventory instead of expensed. In Indian filings the equivalent lines appear as cost of materials consumed, purchases of stock-in-trade, and changes in inventories, which must be read together. Excluded from COGS are selling, administrative and financing costs, which is what distinguishes gross profit from operating profit.