Bookkeeping for Amazon Seller Complete Guide

Bookkeeping is vital for all businesses but for small and midsized e-commerce businesses it's a matter of survival. Proper bookkeeping helps you track expenses, manage cash, and keep a record of all transactions for tax preparation.

Whether you're a veteran eCommerce expert or a newbie you need to be channelized Bookkeeping system is in place to track the health of financial figures that are vital for your business growth and success. 

Why Bookkeeping is necessary for Amazon:

Bookkeeping is necessary for amazon's eCommerce business to help organize financial documentation and records. Through accurate bookkeeping, you can keep track of expenses, cash in hand, bank reconciliation, loans, financing, and other payment processing platform balances that are vital for Amazon's business success.

Here is the list of benefits of Amazon business bookkeeping:

  1. Bookkeeping for Amazon keeps records of all relevant records that are necessary for Tax filing

  2. It helps avoid any Tax Audits, fines, and penalties.

  3. It helps organize all accounting records

  4. Keep all accounts, credit card, PayPal, and other accounts balances up to date.

Cash and accrual base Accounting for Amazon bookkeeping:

While doing bookkeeping for your amazon business you can choose between two different account methods known as cash and accrual bases of accounting.

Accrual Basis:

On accrual bases, you can manage Accounts receivable and payable for revenue and expenses that are not yet received or paid. You can create an Invoice or bill to track these incomes and expenses.

Cash Basis:

While on a cash basis you can only record when income in cash is received and expenses are paid

here is a Quick checklist of proven 5 steps methods of Bookkeeping for amazon:

  1. Proper Bookkeeper:

Being an Amazon seller your schedule is too busy to manage records and keep track of all income and expenses, also, it's a bit technical exercise so you need a professional bookkeeper who has knowledge and expertise to keep your books relevant and updated.

  1. Setting Up Charts of Accounts:

    Charts of Accounts are customized sets of Accounts that reflect on the face of financial statements as line items. Setting up charts of Accounts according to your business need and the industry in which you operate. For Amazon sellers bookkeeping setup of charts of accounts is vital to track each type of income expenses and financing separately.

    Here are Relevant charts of Accounts for Amazon Business Bookkeeping:

 

Description 

Dr

CR


Income

 

 


  Amazon Income

 

 


      Amazon Gift Wrap Credits

 

 


      Amazon Other Credits

 

 


      Amazon Shipping Credits

 

 


      Product, Shipping, and Gift Wrap Taxes Collected

 

 


      Promotional Rebates

 

 


Cost of Goods Sold

 

 


  Amazon Selling Costs

 

 


      Adjustments

 

 


      Amazon Obligated Tax Withheld

 

 


      Cost of Advertising

 

 


      FBA Inventory and Inbound Services Fees

 

 


      FBA Selling Fees

 

 


      FBA Transaction Fees

 

 



For assets it should be:

  • cash

  • Banks 

  • Accounts Receivable

For Liabilities:

  • Payable/ creditor

  • loan

  • Credit cards

Equity:

  • Shareholder Equity

  • Owner Distribution

    3. Inventory Management and cost of goods sold management for eCommerce/Amazon:

There are various accounting methods you can manage different parts of the cost of goods sold. You can avoid out-of-stock conditions and manage track opening and closing stock.

There are various methods of stock tracking and management.

  1. FIFO: First in First out

  2. Average Cost method

  3. LIFO


FIFO Method:


FIFO stands for First in First out, in this method we track the earliest inventory and sold one is thought to as the earliest one.


Average Cost method: 


Under this method the inventory is valued at average cost after every new purchase and inventory sold out at any time is thought to be sold at the average price at that time.


LIFO Method:


In this method contrary to the FIFO method last purchase is thought to be sold first.


4. Reading amazon reports:


To do proper amazon bookkeeping, you must understand amazon reports and how to extract data from them.


Here is the report required for amazon bookkeeping.


  • Amazon settlement report.

This report has all details related to sales and payouts to do proper bookkeeping for amazon you need to extract all relevant that should be in your books of accounts. 


Description

Dr

Cr

Product Charges


x

Shipping 


x

Other


x

Refunded expenses


x




Refund sales

x


Promo rebates

x


FBA fees

x


Cost of advertisements

x


Amazon fee

x



5. Cost of Goods sold:

cost of goods sold is the most technical aspect of the e-commerce business. It helps find the actual profits earned. The cost of goods sold is the overall cost one bears for manufacturing and buying goods one sells.

For e-commerce businesses keeping tracking the cost of gold sold is vital and also gives a competitive advantage.

  1. FIFO: First in First out

  2. Average Cost method

  3. LIFO


FIFO Method:


FIFO stands for First in First out, in this method we track the earliest inventory, and sold one is thought to as the earliest one.


Average Cost method: 


Under this method the inventory is valued at average cost after every new purchase and inventory sold out at any time is thought to be sold at the average price at that time.


LIFO Method:

               In this method contrary to the FIFO method last purchase is thought to be sold first.


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