--- title: Inventory Types and COGS description: "**Audience:** bookkeeper, admin · **Last updated:** 2026-06-16 · [Edit on GitHub](https://github.com/phreesoft/bizuno/edit/main/docs/02-core-concepts/05-inventory-types-and-cogs.md) # Inventory Types and COGS Every inventory item carries a two-letter **type code**, and the single most important thing that code decides is whether the item posts **Cost of…" url: "https://www.bizuno.com/docs/inventory-types-and-cogs/" updated: "2026-06-18" category: Core Concepts --- # Inventory Types and COGS **Audience:** bookkeeper, admin · **Last updated:** 2026-06-16 · [Edit on GitHub](https://github.com/phreesoft/bizuno/edit/main/docs/02-core-concepts/05-inventory-types-and-cogs.md) # Inventory Types and COGS Every inventory item carries a two-letter **type code**, and the single most important thing that code decides is whether the item posts **Cost of Goods Sold**. Pick the wrong type on day one and you're either over-reporting COGS, under-reporting assets, or — worse — rebuilding history to fix it. This page is the *why*: what COGS-tracking means, which types do it, and how to choose. The full per-code table is in [Inventory types](/docs/inventory-types/). --- ## The one distinction that matters: does it post COGS? Bizuno splits every inventory type into two camps by a single constant: ```php define('INVENTORY_COGS_TYPES', ['ma','mi','ms','sa','si','sr']); ``` A type in that list is **COGS-tracking**; everything else is not. The difference is fundamental to the accounting: - **COGS-tracking types are an asset until sold.** When you buy one, its cost sits on the balance sheet as inventory. When you sell it, Bizuno moves that cost from inventory to a COGS account *at the moment of sale* — matching the expense to the revenue it earned. These types carry a cost layer in `inventory_history` and decrement real stock quantity. - **Non-COGS types expense (or cost nothing) up front.** A service, labor line, freight charge, or pure description never holds inventory value. There's no COGS leg at sale time; any cost was recognized when you bought the underlying thing, not when you sold the line. Their stock quantity is parked at a nominal 1 and never depletes. So the question "which type?" is really "does selling this thing relieve an asset I'm carrying, or is it a service/charge with no inventory value?" | Camp | Type codes | Behavior | | --- | --- | --- | | **COGS-tracking** | `si`, `sr`, `ma`, `sa`, `ms`, `mi` | Carries cost, decrements stock, posts COGS on sale | | **Not COGS-tracking** | `ns`, `lb`, `sv`, `sf`, `ci`, `ai`, `ds` | No inventory value, no COGS leg | (`mi` and `ia` are special — see the [full reference](/docs/inventory-types/#the-full-type-reference). You won't create them by hand.) --- ## How a COGS-tracking item is costed When you sell a COGS-tracking item, Bizuno has to decide *which cost* to relieve — the unit you bought in January cost something different from the one you bought in June. Each item carries a **cost method** that answers this: - **FIFO** (`f`, the default) — relieve the oldest cost layer first. - **LIFO** (`l`) — relieve the newest cost layer first. - **Average** (`a`) — maintain a running average cost across all layers. The method is set **per item**, not globally — each SKU has its own `cost_method`, defaulting from the inventory settings for its type. FIFO and LIFO walk the `inventory_history` cost layers in date order (oldest-first or newest-first); average keeps a single blended `avg_cost` that updates on each receipt. Mechanics and worked examples are in [History and costing](/docs/history-and-costing/). --- ## Why the type is effectively permanent Once an item has posted transactions, Bizuno locks its type — the `inventory_type` field (along with `sku` and `cost_method`) goes read-only on the entry form, and a COGS-tracking item with journal history can't be deleted. This isn't an arbitrary restriction. The type determines whether each *past* transaction posted COGS and tracked stock. Retyping retroactively would make the item's history inconsistent with its nature — old sales that relieved inventory would suddenly belong to a type that never holds inventory, and vice versa. The cost layers in `inventory_history` are immutable for the same reason. If you truly need a different type, the move is to **create a new SKU** with the correct type and retire (mark inactive) the old one — not to edit a dropdown. This is why getting the type right on day one matters so much. --- ## A note on assemblies and labor Assemblies (`ma`, `sa`) are COGS-tracking, and their cost is the sum of their bill-of-materials components. But there's a deliberate rule worth knowing at the concept level: **labor and charge lines on a BOM are not capitalized into the assembly's inventory value.** When an assembly is built, only the COGS-tracking component costs roll into the finished item's cost; a `lb` (labor) or `ci` (charge) BOM line is skipped for capitalization. That's intentional, not a bug — labor has its own GL path to COGS, and capitalizing it into inventory too would double-count it. The full reasoning is in [Assemblies](/docs/assemblies/). --- ## Choosing a type A quick decision path for the common cases: 1. **A physical thing you stock and resell?** → `si` (or `sr` if each unit needs a serial number). These are most of your catalog. 2. **Built from component parts?** → `ma` (or `sa` for serialized finished units). Carries a bill of materials. 3. **Sized/colored variants of one product?** → `ms` (Master Stock); Bizuno generates the `mi` variants for you. 4. **A service, labor, or freight/charge line?** → `sv` / `lb` / `ci`. No inventory value. 5. **Bought to order, never stocked (drop-ship, one-off)?** → `ns`. 6. **Pure text on a form, no price?** → `ds`. If you're unsure between a stocked good and a service, ask: *do I carry this on the balance sheet as an asset before I sell it?* Yes → a COGS-tracking type. No → a non-COGS type. --- ## Why this matters The type code is a permanent accounting decision dressed up as a dropdown. It decides whether an item is an asset you carry and relieve, or an expense/service with no inventory weight — and once you've transacted, it's settled. Get the COGS-vs-not question right for what you actually sell and the GL, the balance sheet, and your margins all come out correct without further thought. --- ## Related - [Inventory types](/docs/inventory-types/) — the full per-code reference - [History and costing](/docs/history-and-costing/) — FIFO/LIFO/average mechanics - [Assemblies](/docs/assemblies/) — BOMs and the labor-capitalization rule