How to Calculate Cost of Goods Sold for an Online Shop in Malaysia

Records to keep

• Supplier invoices and proof of payment.
• A stock register by product showing quantity in, quantity out and balance.
• A year-end stock count sheet signed or dated by the person who counted.
• Records of damaged, expired or returned stock.

Cost of goods sold (COGS) Cost of goods sold = opening stock + purchases (including freight and duty) - closing stock

Purchases include the costs of bringing goods to your store, such as import freight and duty.

Valuation. Malaysian accounting standards (the Malaysian Private Entities Reporting Standard, MPERS, or the Malaysian Financial Reporting Standards, MFRS) used by private companies and small businesses measure inventory at the lower of cost and net realisable value. Methods such as first-in-first-out or weighted average are acceptable, but the same method should be used each year.

Why it matters. Stock bought but unsold is not an expense for that year, so counting it correctly avoids overstating costs and understating profit. Platform sales data helps cross-check quantities sold against stock movements.

Dropshippers and print-on-demand sellers hold no stock, so COGS is the supplier's charge for each order.

If the business is a company, the audited or management accounts follow the approved accounting standards.