cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

COGS or Expense?

Hello All, 

my consulting company charges customers an X amount to help them apply to Universities. Let's say we charge $100 for our service. We pay $5 for a university application fee (Always)  and a $2 shipping fee for sending documents (Always). 

My question is: should these fees that we payout of the $100, be considered as cost of goods or as an expense?

 

Thank you 

Solved
Best answer April 18, 2020

Best Answers
Highlighted
Level 4

COGS or Expense?

Cost of goods sold are DIRECT costs of producing goods sold. They are almost always inventory related (items purchased for resale or items purchased to make manufactured goods).  

 

That said. The shipping fee is clearly a selling (or administrative) expense - it is not a DIRECT cost. 

I have seen companies post what you refer to as the application fee to either a cost of goods account or an expense account. Some like to use the cost of goods account because it helps them keep the direct costs separate from the indirect costs. I think either way you do it will be okay - the tax preparer will place it in the proper place on your tax return.

 

Kathy  

View solution in original post

4 Comments
Highlighted
Level 15

COGS or Expense?

They are expenses.

 

COGS is related to the cost of inventory item you sell when you file taxes

Highlighted
Level 4

COGS or Expense?

Cost of goods sold are DIRECT costs of producing goods sold. They are almost always inventory related (items purchased for resale or items purchased to make manufactured goods).  

 

That said. The shipping fee is clearly a selling (or administrative) expense - it is not a DIRECT cost. 

I have seen companies post what you refer to as the application fee to either a cost of goods account or an expense account. Some like to use the cost of goods account because it helps them keep the direct costs separate from the indirect costs. I think either way you do it will be okay - the tax preparer will place it in the proper place on your tax return.

 

Kathy  

View solution in original post

Highlighted
Level 4

COGS or Expense?

Please mark this as solved when you have a acceptable solution so it will be moved from the unanswered questions list.

 

 

Highlighted
Level 1

COGS or Expense?

thanks for the info

 

so i Know from each customer that i get there are exact fix cost directly related to it.
im preparing my own taxes so it will help to know where I should place it  

Need to get in touch?

Contact us