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Jarett2
New Member

Payment for drop shipping supplier

Where do i put the payment i made to my supplier? for  my drop shipping business, My supplier is from china, they pick up my order then directly ship the product to my customer.

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1 Reply
MinhT1
Expert Alumni

Payment for drop shipping supplier

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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