In a perpetual inventory system, every time a sale is made, we make an entry to show the sales revenue but also an entry to show the Cost of Goods Sold (COGS).

How do I know how much to debit to COGS where does the cost value for COGS come from? How does COGS relate to Inventory?

Explain (in three or four sentences) how Cost of Goods Sold relates to Inventory.