Case File 018: The Case of the Overstated Profit — When COGS Goes Missing

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Filed under: Misleading Margins & Expense Evasion

The reports looked great—too great. “Wow, we’re really killing it this quarter,” the client said, beaming. Detective Debit raised an eyebrow. “Let’s take a peek at your Cost of Goods Sold.”

A magnifying glass examining a document with text, indicative of analysis or investigation.

What she found? A suspiciously thin COGS column and a whole lot of expenses sitting in the wrong place—or nowhere at all.

Detective Debit investigates bookkeeping mysteries and uncovers hidden financial clues. She solves cases involving vague accounts, misclassified expenses, and audit risks.
A yellow sticky note pinned with a red pushpin reads 'Clues' and lists four points: 'COGS Too Thin,' 'Assets Not Expensed,' 'Misplaced Direct Costs,' and 'Profit Looks Suspicious.'

The Clues

  • High revenue but unusually high net profit

  • Inventory purchases booked as assets but never expensed

  • Direct costs (like materials or subcontractors) coded to general expense accounts

  • COGS account showing little to no activity despite active sales

The Twist

This wasn’t fraud—it was a classic case of misclassification. When direct costs aren’t properly tracked in COGS, the Profit & Loss report paints a rosy picture that doesn’t match reality. And when tax time rolls around? That “profit” becomes taxable income.

Cartoon tornado swirling downward.

Detective Debit’s fix: reclassify direct costs, review inventory workflows, and make sure COGS reflects the true cost of doing business.

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The Takeaway Gross profit tells a story—and if it’s too good to be true, it probably is. Review your COGS regularly, ensure direct costs are coded correctly, and don’t let inventory purchases sit idle on the balance sheet. Clean books = honest margins.

Need Backup? If your profit looks suspiciously plump and your COGS is whispering “help,” I can step in. We’ll trace the trail, fix the flow, and make sure your reports reflect the real health of your business.

Headshot of Detective Debit, the fictional forensic bookkeeper who investigates financial mysteries and uncovers misclassified expenses with clarity and grit.
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Case File 019 — The Vanishing Bank Feed

The connection was live. The bank was active. But the transactions? Gone. Detective Debit investigates the case of the missing bank feed—and uncovers how sync issues, duplicate accounts, and silent errors can leave your books full of holes.