Shipping Costs in CoGS.

Normal shipping costs incurred from your vendor should be capitalized and reflected in the inventory value (will go through COGS in the period that item is sold). Shipment costs to move inventory from one location to another within your distribution system is generally expensed as it doesn't add any value to the inventory asset. Costs for shipments to customers should be recognized as shipping expense (see previous discussion in this forum on how to account for associated shipping revenue if it is specifically identified in your contract with the customer).