My boss has QB set up to include COGS items (inventory, labor, etc) as expenses. Will this be a problem?

I'm new to accounting and need some help understanding how to properly account for everything. As it stands, when items are purchase by the store (auto painting) for the express purpose of finishing a paint job, the items are expensed to the appropriate account, but those accounts are set up as expenses and not COGS. He also has payroll and contract labor set up as expenses. Will this cause problems later or does it matter? Where does non-inventory items get expensed to?