I'm coming from non-accounting and non-finance backgrounds. I need help in form of understanding through a question.

When a company sends items to club members but is charged for shipping fees from a third party, and the company is reimbursed that cost by the club member, is said cost counted as part of the COGS or no? I would assume no as that shipping cost is included in the cost of membership? Therefor counted towards total revenue? But say the company instead decides to incur the total shipping cost, would that now count towards COGS? Got very lost when trying to attempt to understand some accounting articles.

1 Answer 1


If the company is paying the supplier for shipping, even when they forward that cost on to the member, it is still part of the COGS because the company does, in fact, incur a cost. The fact that shipping is passed on to the customer has no bearing whether the shipping is a cost of doing business.

Here's a good link to read on the article explaining it:


  • Oooh right on, that actually makes sense! So since shipping is indeed part of the COGS, regardless of including it with or without the membership, that shipping cost therefor isn't apart of the total revenue the company gains?
    – J. Flink
    Apr 17, 2021 at 19:53
  • "Revenue" is whatever you collect from your customers for your goods/services. If you choose to include shipping as part of the membership price then that comes out of revenues, along with any other costs. If you charge shipping separately from the membership then it would be recorded as revenue, even though it may be offset by the cost of shipping you paid your vendor.
    – RiverNet
    Apr 17, 2021 at 20:47
  • Keep in mind also, what you pay to your vendor for shipping on a per-item basis will be different than your cost to ship each item to your customers. In other words, if you buy 100 widgets from your vendor, the per-widget shipping cost to receive them will be lower than what it costs you to ship them individually to your customers as they're sold, so NOT charging the customers for shipping will eat into your profit margins.
    – RiverNet
    Apr 17, 2021 at 20:51

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