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:
|Amazon Lending||Current Liability||Money borrowed from Amazon|
|Sales Tax Liability||Sales Tax||Stored up sales tax that has been collected but not paid to the state yet|
|Sales 1||Revenue||Primary revenue account|
|Shipping Income||Revenue||Income received for shipping costs|
|Sales Returns 1||Revenue||Account for return of the primary revenue (always a negative)|
|Amazon Reimbursements||Revenue||Reimbursement revenue received from Amazon for lost and damaged goods|
|Cost of Goods Sold||Direct Costs||Primary Cost of Goods Sold account for the cost of your products|
|Amazon Fulfillment Costs||Direct Costs||Expense account related to fulfilling Amazon orders|
|Amazon Seller Fees – FBA||Direct Costs||Primary expense account for items related Amazon FBA|
|Inbound Shipping||Direct Costs||Cost of importing/delivering inventory to the warehouse|
|Order Promotions||Expense||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