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Inventoriable costs are costs that can be traced to your inventory. That includes the purchase price of the inventory item. However, there are other costs that should be added to the asset’s cost. You refer to these costs as inventoriable.

Let’s say you own a furniture store that sells lamps. You carry an expensive model of lamp in your store. Parts of the lamp can break easily. As a result, it’s expensive to ship the lamps. When the lamps arrive, they’re stored carefully to prevent breakage.

Your inventory value for the lamp obviously includes the purchase price. It should also include all costs to prepare the asset for sale, such as the shipping cost and any extra costs you incur to store and display the lamp.

Now consider the impact of including more costs in inventory. Inventory costs aren’t posted as expenses (expensed) until the asset is sold. All the lamp costs remain in inventory until a lamp is sold. At that point, the lamp cost is posted to cost of sales (also called cost of goods sold).

Other costs are expensed as soon as they are incurred. A good example is marketing costs. Marketing costs are immediately expensed, because it’s difficult to know if and when the costs generated a sale.

If you run a million-dollar ad during the Super Bowl for running shoes, it’s not possible to know how many shoes were sold as a result of running the ad. So you expense it sooner than later. This is the principle of conservatism, which is explained in the next section.