Gold Buying Business Bookkeeping — COGS, Inventory & Refinery Payouts

You're standing at the counter at closing time. The cash drawer is lighter, the tray under the glass is heavier, and a refinery check from last month sits in the mail pile. Here's the answer up front: every gram you buy is inventory at cost until it settles, and your profit is the settlement minus that lot's cost. Get those two things right and the rest of the books mostly take care of themselves.

This is general information, not legal or tax advice. Record-keeping, licensing and reporting rules vary by state, county and city, and tax treatment depends on your business setup. Check with your local police department or licensing office about purchase records, and with a CPA or tax professional about your books.

The Three Numbers That Run a Gold Buyer's Books

A pawn shop, a scrap buyer working out of a booth and a small dealer all have the same core cycle:

1. Purchases: cash out the door, metal in the tray.
2. Inventory: metal you own but haven't turned into money yet.
3. Settlements and sales: refinery checks, wholesale sales, retail sales.

Ordinary accounting software handles this fine if you set it up like a retailer: an inventory asset account, a cost of goods sold account and a sales account. The difference with gold is that your "product" changes value every day while it sits in the safe. So you track it two ways: at cost for the books, and at melt to see your risk.

Business costs like rent, licenses, software and testing supplies are operating expenses. They sit below gross profit. Keep them separate from metal cost.

Step 1: Log Every Buy as Inventory at Cost

The purchase log is the base of everything. If it's missing, the rest of your bookkeeping is a guess.

Each line should carry, at minimum:

Many jurisdictions require a seller's ID, a signature and a detailed item description in the purchase record. They also set how long you keep those records and whether you hold items before melting. Those rules vary by location. Don't guess. Ask your licensing office.

Now the math. Your cost for a lot is:

Lot cost = price paid to sellers + shipping + insurance + assay/refining fees charged to you

The paid-vs.-melt check on each buy:

Paid % of melt = price paid ÷ (grams × karat purity × spot per gram)

Worked example: you buy 40 g of 14K scrap at 75% of melt. At $4,161/oz spot (as of October 13, 2026), 14K melts at $78.03 per gram, so 40 g melts at $3,121. At 75% you pay $2,341. That figure goes into inventory, not expenses. If you need the per-karat math behind it, see how to calculate scrap gold value.

Step 2: Carry Metal as Inventory Until It Settles

When cash leaves the drawer for gold, one asset (cash) turns into another (inventory). Your profit hasn't changed yet. That's the mistake that wrecks most first-year books: logging every buy as an expense, so a busy buying month looks like a loss and a big settlement month looks like a windfall.

Group buys into lots (one lot per refinery shipment). Each lot gets:

• A lot number
• Total grams by karat
• Total cost (from Step 1)
• Expected fine weight: fine grams = grams × purity (14K = 0.5833, 10K = 0.4167, 18K = 0.75)

For the 40 g 14K example: 40 × 0.5833 = 23.33 fine grams. That's the number you'll check the refinery's assay against.

Keep business inventory physically and on paper away from any personal stack. Mixing them causes basis problems you can't untangle later.

Step 3: Book the Refinery Settlement Against the Lot

The settlement is your sale. Two entries happen together:

• Revenue: the settlement amount
• Cost of goods sold: that lot's total cost, moved out of inventory

Lot gross profit = settlement − lot cost

Back to the 40 g of 14K. Say your refinery's terms work out to about 95% of melt after its deductions. That's an example figure, not a typical rate, so use your own contract. The settlement is $2,965. You paid $2,341. Gross margin is $624.25 before shipping and insurance, which you subtract next because they're part of the lot cost.

Two things change that number in real life:

1. Spot moves. The refinery pays at the price on its settlement or lock date, not the day you bought. Part of every lot's profit or loss is price movement, not buying skill. That's why paid vs. melt on the purchase date matters: it shows the margin you actually bought, separate from the market.
2. Assay differences. If the refinery reports fewer fine grams than you expected, compare it line by line. A 14K item that assays low may be a weak stamp or solder-heavy. Note it against the seller.

For packing, insuring and reading settlement terms, see refinery shipping for scrap gold.

Cost of Goods Sold at Month End

Even with lot-level tracking, your accountant will want period cost of goods sold:

COGS = beginning inventory + purchases − ending inventory (all at cost)

Worked example by the gram, keeping spot flat to make it easy to follow:

• Beginning inventory: 60 g of 14K, bought at 75% of melt = $3,511
• Purchases this month: 200 g of 14K at 75% = $11,705
• Ending inventory: 40 g still in the safe = $2,341
• Grams settled: 60 + 200 − 40 = 220 g
• COGS: $12,875

If all 220 g settled at 95% of melt, revenue would be $16,309, and gross profit $3,433 before lot fees and operating expenses.

In real months spot moves and you buy across karats, so the dollar figures won't line up this neatly. The formula still holds. Your accountant can tell you which inventory method fits (tracking each lot specifically, first-in-first-out, or average cost). Tracking by lot usually fits refinery shipments best, but that's their call.

A Simple Chart of Accounts for a Gold Buyer

Split gold and silver if you buy both. Splitting by source (walk-in, estate, online) helps too. The scrap gold business guide covers whether those margins can carry the operating side.

Common Mistakes

• Treating purchases as expenses. Your monthly profit swings wildly and tells you nothing. Purchases are inventory.
• Calling the refinery check pure profit. Most of it is your own money coming back. Only the part above lot cost is gross profit.
• Leaving fees out of lot cost. Shipping, insurance and assay charges are real. Leave them off and every lot looks better than it was.
• Carrying inventory at spot. Spot is good for checking risk. The books use cost.
• No paper behind cash buys. If you can't back up a purchase, an auditor may not let you subtract it, and you could be taxed on the full settlement. Get a signed receipt for every buy.
• Not checking assays against expected fine grams. If you skip this, short settlements slip by. More traps are covered in mistakes new scrap gold buyers make.
• Mixing personal metal with business stock. Keep separate trays, separate records and separate cost basis.

Bottom Line and Checklist

• Log every buy the same day: grams, karat, price paid, payment method, seller record.
• Add shipping, insurance and fees to the lot they belong to.
• Carry metal as inventory at cost until it settles.
• Number your lots and record expected fine grams.
• Book each settlement against its lot: revenue in, lot cost to COGS.
• Run beginning + purchases − ending at month end.
• Ask your CPA about the inventory method and your local office about record and hold rules.

The slow part is the data entry. In Nu Stack, each buy goes into Holdings with optional fees, shipping and insurance counted toward cost, and a PDF receipt with a signature pad. Batches group purchases into refinery lots, and the Refinery Tracker records the settlement amount. The Profit dashboard shows P&L by source, metal and period. Your accountant gets an Excel export with a tax reporting sheet instead of a shoebox. Nu Stack also shows paid vs. melt on the day you bought, so you can tell market moves apart from buying skill.

Price your next lot with the free scrap gold calculator, and read the refinery shipping and scrap gold business guides next.