In your business, you're buying goods for resale.
If you are on a cash basis, your payment to your supplier in China should be categorized as Purchases.
Purchases is then used to calculate Cost of Goods Sold (COGS).
COGS = Beginning Inventory + Purchases - Ending inventory.
If all your purchases are drop-shipped to your customers, then both Beginning and Ending Inventories are equal to 0, and COGS = Purchases.
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