How to Account for Amazon fees - Amazon Fee Accounting
Estimated reading time: 3 minutes.
Amazon Fee Accounting Basics
After taking the time to break down what Amazon’s sales and FBA fees are, the next logical move is to account for them in your preferred accounting software. This way when you look at reports like your Cash Summary and PNL (profit and loss) the Amazon fee and Amazon income portion is easy to spot, understand, and interpret. Setting up and coding your Amazon incoming revenue and outgoing expenses is the sort of thing you really only have to do once. There is a chance that Amazon may decide to add more fees later, but after getting a grip on your Amazon fee accounting it will be easy to make updates if necessary. So don’t sweat it.
Amazon Selling and Your Chart of Accounts
The basics of Amazon income and expenses
There are lots of different Amazon fees, but they do not all need their own code and name in your chart of accounts. The list below is likely all that you will need regardless of whether or not you use FBA for fulfillment. You will want a code for:
- Amazon Lending
- Sales (might be a good idea to make an ‘Amazon Sales’ code to separate Amazon from your other sales)
- Shipping Income
- Amazon Reimbursements
- Cost of Goods Sold
- Amazon Fulfillment Costs
- Amazon Seller Fees - FBA
- Inbound Shipping
- Order Promotions
When you compare the list above to the much longer list of Amazon transaction types it seems short. The reality is that some of the fees can be grouped into the same code within your accounting software. Otherwise, the list above could be over 35 lines long whereas my list is nine to ten. In fact when you look at things like Amazon Lending, which you might not use, then the list of code additions can be even smaller.
Amazon Sellers Chart of Accounts Breakdown
Think about the above Amazon specific chart of accounts names like this:
Money borrowed from Amazon
Sales Tax Liability
Stored up sales tax that has been collected but not paid to the state yet
Primary revenue account
Income received for shipping costs
Sales Returns 1
Account for return of the primary revenue (always a negative)
Reimbursement revenue received from Amazon for lost and damaged goods
Cost of Goods Sold
Primary Cost of Goods Sold account for the cost of your products
Amazon Fulfillment Costs
Expense account related to fulfilling Amazon orders
Amazon Seller Fees - FBA
Primary expense account for items related Amazon FBA
Cost of importing/delivering inventory to the warehouse
Costs associated with running promotions on products
The job now is to simply code each of these into your chart of accounts. If you are an A2X user then you can request a list of suggested chart of accounts for Amazon sellers. In order to keep your Amazon sales and expenses simple, trackable, and easy to understand, it is best practice to specifically code Amazon sales and expenses. Update Mar 2017: Inbound Shipping was incorrectly noted as a liability, it is now updated as a direct cost
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