If my company builds and sells websites can I apply the wages for the web designers to Cost Of Goods Sold (the goods being the websites or other production projects that they build)? Of couse there is the wages expence account but I want our cost of production (designers wages) to be subtracted from Revenues to get to Gross Profit on the Income statement. Someone told me that wages have to be reported as an expence if they are my employees. My reasoning comes from the fact that direct labor hours to manufacture a product (in my case websites) are included with cost of goods sold along with manufacturing overhead and direct materials.