The 'billable' function is actually intended to reimburse expenses.  If you are truly billing your clients for 'Time & Materials', or Materials + mark-up, then you are not really selling the materials.  You're just passing along the expense and your true income is only what you put in the 'mark-up' income account.  In that case, your financials would be correct; income is only the mark-up and COGS is a lower number because you are 'reimbursing' the COGS when you bill to client.

On the other hand, if  you are selling to your client a job with a pre-determined contract price where you are not revealing the cost lines to them, then you should create an invoice for the entire contract, which would all be income, offset by the entire COGS + PST, which is your expenses.  Then you will see more what you are expecting to see on the income statement.

So it depends on how you have set up your contract with your clients.  Cost + would be the first way, only realizing the mark-up as income, and total income less total COGS would be the second way.

It also wouldn't hurt to check with your external accountant what they think is best.  But I believe it is perfectly acceptable to bill time and materials + markup the first way.  Yes, your income is lower, but so is your COGS so it is still all correct in relation to the overall profit & loss.