Introduction
Selling on Amazon using Fulfillment by Amazon (FBA) is one of the easiest ways to start an online business. Amazon takes care of storage, shipping, customer service, and returns. As a result, sellers can focus on finding products and growing sales.
However, while logistics become easier, accounting becomes more complex. Amazon charges many fees, pays sellers every two weeks, and handles inventory in its own warehouses. Because of this, many Amazon FBA sellers struggle to understand their real profits.
In this guide, you will learn how accounting works for Amazon FBA sellers, why it is important, and how to manage your finances correctly to grow your business safely.
Why Accounting Matters for Amazon FBA Sellers
Many sellers look only at revenue. However, high sales do not always mean high profit. Proper accounting helps you understand where your money comes from and where it goes.
Good accounting allows Amazon FBA sellers to:
- Know their real profit
- Track all Amazon fees correctly
- Control cash flow
- Prepare tax reports on time
- Make better business decisions
Without clear accounting records, sellers can lose money without noticing it.
How Amazon FBA Payments Work
Amazon does not pay sellers for each order. Instead, it sends settlement payments, usually every 14 days.
What Amazon Pays You
- Product sales
- Shipping credits (if applicable)
- Promotional refunds
- Other adjustments
What Amazon Deducts
- Referral fees
- Fulfillment fees
- Storage fees
- Advertising costs
- Refund and return fees
Therefore, the amount you receive is not equal to your total sales. That is why settlement reports are essential for accounting.
Common Accounting Challenges for Amazon FBA Sellers
1. Many Different Fees
Amazon charges several types of fees. Because of this, manual tracking often leads to mistakes.
2. Inventory Management
Inventory stored in Amazon warehouses must be tracked correctly. Otherwise, profits may look higher than they really are.
3. Refunds and Returns
Refunds can happen weeks after a sale. As a result, revenue changes over time.
4. Selling in Multiple Countries
If you sell in the US, UK, or EU, you must deal with:
- Different currencies
- VAT or sales tax
- Local tax rules
Basic Accounting Terms Amazon Sellers Must Know
Revenue
Revenue is the money you earn from sales before expenses.
Expenses
Expenses include Amazon fees, advertising, software, shipping, and professional services.
Profit
Profit is what remains after subtracting all expenses from revenue.
Cash Flow
Cash flow shows when money enters and leaves your business. This is very important for reordering inventory.
Revenue Recognition for Amazon FBA Sellers
Revenue should be recorded when the sale is completed, not when Amazon sends the payment.
For example:
- A product is sold today
- Amazon pays you two weeks later
The sale belongs to today, not the payment date. This method gives a more accurate view of your business performance.
Cost of Goods Sold (COGS)
COGS is one of the most important parts of Amazon accounting.
It includes:
- Product purchase cost
- Manufacturing costs
- Packaging
- Shipping to Amazon warehouses
- Customs and import duties
Because of this, ignoring some costs can lead to false profits.
Inventory Accounting for Amazon FBA
Inventory is often the biggest investment for FBA sellers. Therefore, it must be tracked carefully.
Inventory Valuation Methods
- FIFO (First In, First Out) – most common
- Average Cost
FIFO is usually preferred because it reflects real product flow.
Best Practices
- Track inventory sent to Amazon
- Monitor damaged or lost items
- Reconcile inventory reports monthly
As a result, your financial reports will stay accurate.
Chart of Accounts for Amazon FBA Sellers
A clear chart of accounts makes accounting easier and reports more useful.
Income Accounts
- Amazon Product Sales
- Other Marketplace Sales
Cost of Goods Sold
- Product Cost
- Shipping and Freight
- Customs Duties
Expense Accounts
- Amazon FBA Fees
- Amazon Advertising (PPC)
- Software Subscriptions
- Accounting and Legal Fees
- Bank Fees
Asset Accounts
- Inventory
- Cash
- Amazon Receivable
Cash Accounting vs Accrual Accounting
Cash Accounting
- Records income when money is received
- Simple to use
- Suitable for very small sellers
Accrual Accounting (Recommended)
- Records income when sales happen
- Matches costs with revenue
- Gives a clearer financial picture
Most growing Amazon FBA businesses use accrual accounting.
Amazon FBA Taxes Explained Simply
Income Tax
Amazon profits are subject to income or corporate tax, depending on your business structure.
Sales Tax and VAT
- US sellers must follow sales tax rules
- EU sellers must manage VAT registration and filings
- Amazon may collect taxes, but reporting is still your responsibility
International Sellers
Cross-border sellers should pay attention to:
- Import VAT
- Withholding taxes
- Currency conversion differences
Accounting Software for Amazon FBA Sellers
Spreadsheets are risky and time-consuming. Therefore, using accounting software is highly recommended.
Popular Accounting Tools
- QuickBooks Online
- Xero
- Wave (for small sellers)
Amazon Integration Tools
- A2X
- Link My Books
- Taxomate
These tools automatically import Amazon data and reduce errors.
Monthly Accounting Checklist
To stay organized, Amazon FBA sellers should follow this monthly routine:
- Reconcile Amazon settlements
- Update inventory records
- Record advertising costs
- Review profit and loss reports
- Check cash flow
- Prepare tax estimates
As a result, financial surprises are avoided.
Common Accounting Mistakes Amazon Sellers Make
- Ignoring small Amazon fees
- Mixing personal and business money
- Not tracking inventory correctly
- Relying only on Amazon dashboards
- Waiting too long to prepare taxes
Avoiding these mistakes saves time and money.
When Should You Hire an Accountant?
You should consider professional help when:
- Sales exceed $100,000 per year
- You sell in multiple countries
- Taxes become complex
- You plan to scale or sell your business
An Amazon-focused accountant understands marketplace challenges better.
How Good Accounting Helps You Grow
With accurate accounting, you can:
- Identify profitable products
- Control advertising spending
- Plan inventory purchases
- Improve pricing strategies
- Attract investors or buyers
Therefore, accounting becomes a growth tool, not just a requirement.
Conclusion
Accounting for Amazon FBA sellers is not optional. It is essential for long-term success.
By tracking revenue, expenses, inventory, and taxes correctly, sellers gain control over their business. As a result, they can grow safely, avoid tax issues, and increase profits.
Whether you are a beginner or an experienced seller, good accounting practices will protect your Amazon business and support sustainable growth.
Frequently Asked Questions
Do Amazon FBA sellers need accounting software?
Yes. Software reduces errors and saves time.
Is Amazon accounting different from normal e-commerce?
Yes. Amazon’s fees, settlements, and inventory handling make it more complex.
Can I do Amazon accounting myself?
Small sellers can. However, professional help is recommended as the business grows.