Cost of Goods Sold vs. Expenses

you're absolutely correct!
if the books are being sold, then the lot (total expense) should be entered as inventory ... and relieved as the books are sold ... this is an elementary accounting principle ... expense (cogs) is recognized as income is recognized.
if the books are promotional materials ... free ... then you should be able to expense the total amount.

The advice you got was right. The way to think about it is this: you are changing $$ (money) which is a good thing (asset) into books, which are another good thing (also an asset). You are simply changing one asset into another.

You "expense" things when you consume them. If you buy a lawyer's advice and it costs you $200, you've consumed $200. When you pay rent for your office, you consume that, and rent is an expense.

Inventory is funny, though. If a book costs you $2 to print and you sell it for $10, then in selling it you generate $2 worth of expenses. That's why Quickbooks generates a standard profit and loss statement that gives you then what would be a gross profit of $8 after deducting the cost of goods sold.

My staff is invoicing items for promotion in the normal way, (items tied to revenue accounts) then they zero out the invoice by a negative entry on promotion item that is tied to COGS.

I am trying to make sense of this approach but can't understand it.

I don't think this approach is correct at all. Is there a better way to invoice products at no charge to customer?

I think that what your staff is trying to do is send the customer a free book, and then zero out the invoice to avoid having the cost of the free book show up as cost of sales and the invoiced units affecting your unit sales.

The problem with QuickBooks is that you can only have one COGS account linked to each item.

There are several ways to handle the sales of promotional copies in QuickBooks.

1st Method.

For each book create a 2nd item with a Promotional Account (see Review GL Account Below) as your COGS account and a sales price of zero. So they are not confused with the normal book start the Item description with "Promo -" or "Free -".

When you need to send out free books transfer stock from your primary account to this promotional account (i.e. decrease the inventory in the first account and increase it in the promo item by the exact same amount)

Use this Promo Item when you ship the free book to the book reviewer. It will update the Review Copies Expense account with the expense of the shipped books and does not affect the unit sales for the primary product.

Now you can see how many promotional copies were shipped, to whom and how much the mailing of Review copies is costing you.

The downside to this method is that it requires you to transfer stock whenever you wish to send out a free book. Of course, whenever a new book is printed you could immediately transfer 50 to 100 copies to the Promo Item accout if you expect to send out this many promotional copies (including the author copies).

FYI: Extract from Chart of Accounts for Marketing Expenses

66000 ? Marketing Expenses

___66400 ? Publicity

___________66410 ? Advertising

___________66420 ? Review Copies

___66500 ? Direct Mail Expenses

etc.

Promotional copies should be taken out of inventory, but they should NOT be listed as a COGS expense. They should, instead, be listed as a marketing expense. This enables you to more accurately gauge your marketing costs and effectiveness.

For tax purposes, however, it's pretty much a wash.

I would probably not invoice the promo copies, because it does move the cost to COGS. I would probably do a journal entry, DR promo materials and CR Inventory. But the path you choose to get to the end result is a matter of preference.