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cpizzullo-pizzyp
March 13, 2024
Question

Proper way to account for subsidized 'free shipping'

  • March 13, 2024
  • 1 reply
  • 0 views

Shopify > A2X-COGS > QBO Essentials

 

Hi All.

We are about to begin selling a single SKU soon.  We are not charging our customers shipping but have built in an estimated "average" (say $20) into the sale price.  We will not include this $20 in the A2X Item Cost for COGs.  Our actual Freight Out Shipping charges will go into a COGS-Shipping account (correct?).  I assume the $20, however, should go into some account so we can compare to actuals, but I also assume we can't double up on that 'income' since $20 is coming in as Sales revenue from Shopify.

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So, assuming I've stated this correctly, what accounts and process should we follow?

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Thank you!

1 reply

Rainflurry
Rainflurry
March 14, 2024

@cpizzullo-pizzyp 

 

"Our actual Freight Out Shipping charges will go into a COGS-Shipping account (correct?)."

 

Not quite.  Freight-Out is not part of COGS.  Freight-In (your vendor's shipping charges) is a part of COGS because it is included in the cost to get the item available for sale to your customer.  You can record your freight-out cost for shipping under an expense account called "Freight-Out" or "Shipping Costs" or a sub-account of "Freight-Out" called 'Free Shipping' or some account that allows you to track those costs separately.  To compare those expenses with the $20 in income you're receiving, you can create bundle to allocate the $20 in income to a specific income account/sub-account so you can compare the income received vs. the costs incurred.    

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