Amazon FBA Accounting for E-commerce Sellers: From Settlements to Gross Margin

Why Your Amazon Payout Is Not Your Revenue

The number Amazon deposits into your bank account every two weeks rarely, if ever, matches your total sales volume. For founders managing their own books in QuickBooks, this gap creates immediate confusion and long-term risk. The bi-weekly payout is not revenue; it’s what remains after Amazon deducts a complex web of fees, refunds, and held reserves from your gross sales. Without a system to unpack this deposit, you cannot calculate accurate gross margins, track SKU-level profitability, or confidently forecast cash flow.

Getting this process right is about building a financial foundation that can support your e-commerce brand as it scales. An inaccurate understanding of your revenue and costs leads to flawed pricing strategies, poor inventory management, and potentially understated or overstated tax liabilities. For more context, see our hub on Inventory & Fulfilment Cost Accounting.

Gross Sales vs. Net Deposit: The Core Challenge

The foundational challenge of Amazon FBA accounting for US sellers lies in a simple but critical distinction: gross revenue versus the net bank deposit. Your gross revenue is the total top-line sales value of all goods sold to customers before any deductions. The net deposit is that revenue after Amazon subtracts its fees, holds back for refunds, and accounts for other adjustments. Treating the deposit as your revenue fundamentally misstates your business performance and inflates your net profit margins, creating a distorted view of your financial health.

To see the full picture, you must rely on the Amazon Settlement Report. The Amazon Settlement Report is the single source of truth, detailing every transaction within a payout period. It breaks down every sale, every refund, and every one of the dozens of potential FBA fees. Ignoring this report is like flying blind; you see cash coming in, but you have no real insight into your profitability or the costs associated with each sale. Understanding how to record Amazon FBA fees in bookkeeping starts with this report, as it allows you to correctly book gross sales while accounting for every deduction.

How to Record Amazon FBA Fees in Bookkeeping: A Three-Part Guide

Building a reliable accounting system requires a methodical approach. We break the process down into three key parts: reconciling the payout itself, allocating the various fees correctly, and managing the unique balance sheet items created by Amazon’s ecosystem.

Part 1: Reconciling Payouts to Uncover True Revenue and Expenses

Reconciling an Amazon payout means creating a journal entry in your accounting software, like QuickBooks, that mirrors the activity summarized in the Settlement Report. A common and effective method for businesses in the early stages is the summary journal entry. Instead of logging every single order, you create one entry per payout that captures the totals for the entire period.

The goal is to make your books match reality. Your sales were X, your fees were Y, and the resulting deposit was Z. Here is a simplified example of what a summary journal entry for a $10,000 payout might look like in QuickBooks:

• Debit: Checking Account (Bank Deposit): $10,000.00
• Debit: Amazon Fees (Expense/COGS): $5,500.00
• Debit: Refunds & Allowances: $500.00
• Credit: Gross Sales (Income): $16,000.00

In this scenario, you generated $16,000 in gross sales. After accounting for $500 in customer refunds and $5,500 in various Amazon fees, the net deposit to your bank was $10,000. This entry correctly records your top-line revenue and the associated costs, giving you a far more accurate picture of performance than just booking the $10,000 deposit as revenue.

However, this manual process has its limits. In practice, we see that manual reconciliation becomes a significant problem for sellers around the $50,000 per month revenue mark. The reality for most scaling startups is more pragmatic: sellers often switch to automation when a manual journal entry takes more than one hour per payout. Tools like A2X or Link My Books integrate directly with Amazon and QuickBooks, automatically creating detailed summary journal entries for each payout. This eliminates manual work, reduces errors, and provides a much more granular Amazon FBA fee breakdown. If you sell across platforms, read our guide on Multi-Channel Inventory Accounting Challenges.

Part 2: Allocating FBA Fees for Accurate Gross Margins

Once you have a system for reconciliation, the next step is correctly categorizing the fees. This is essential for accurate gross margin analysis and FBA inventory accounting. Not all Amazon fees are created equal; they must be separated into Cost of Goods Sold (COGS) and Operating Expenses (OPEX).

This distinction is crucial for understanding your true profitability. COGS are costs directly tied to producing or acquiring your products and getting them to the customer. For an FBA seller, this includes:

• Referral Fees: The commission Amazon takes on each sale, typically around 15% of the sale price. This is a direct cost of making the sale.
• FBA Fulfillment Fees: The costs for picking, packing, and shipping an item from an Amazon fulfillment center. See our guide on Fulfilment Cost Allocation for best practices.
• Inbound Shipping Costs: The cost to ship your inventory to Amazon’s warehouses.

These fees should be booked to specific COGS accounts in your QuickBooks Chart of Accounts. Doing so ensures your gross profit (Revenue - COGS) accurately reflects the profitability of your products before overhead. The IRS provides guidance that explains COGS and inventory treatment in detail.

Operating Expenses, on the other hand, are costs related to running your business on the platform but not tied to a specific sale. For accurate tracking of Amazon seller expenses, you should categorize these separately:

• Monthly Subscription Fees: The fixed fee for a Pro Seller account.
• FBA Storage Fees: The monthly and long-term costs to store your inventory in Amazon's warehouses.
• Advertising (PPC) Costs: Your spend on sponsored product ads and other marketing campaigns on the platform.
• Return Processing Fees: Fees associated with handling customer returns.

These should be booked to OPEX accounts. Separating them from COGS prevents your gross margins from being distorted by general business costs. By correctly allocating these costs, you can perform much more meaningful analysis, like calculating the true landed cost of each SKU and making smarter decisions about pricing, promotions, and inventory management.

Part 3: Managing Cash Flow and Liabilities in Amazon's Ecosystem

Beyond revenue and expenses, Amazon's system introduces unique challenges for managing your balance sheet and forecasting cash flow. Three key areas that US sellers must understand are FBA inventory accounting, the Account Level Reserve, and sales tax obligations.

FBA Inventory Accounting

Your inventory is one of your largest assets. In your bookkeeping system, inventory you purchase should be recorded as a current asset on your balance sheet, not an immediate expense. It only becomes an expense (specifically, COGS) at the moment a product is sold. This accrual-based method provides a much more accurate view of your profitability over time compared to expensing all inventory upon purchase.

Account Level Reserve

Amazon often holds a portion of your funds in an **Account Level Reserve**. This is money held back to cover potential customer claims, chargebacks, or refunds. A common mistake is to view this as an expense. It is not. The reserve is your money that Amazon owes you, making it a current asset on your balance sheet, similar to Accounts Receivable. In QuickBooks, you should create an asset account called "Amazon Reserve" to track this balance. When Amazon releases the reserve in a future payout, you debit your bank account and credit the Amazon Reserve account. This reserve, combined with Amazon's typical disbursement cycle of 14 days, can create significant cash flow lags, so accurate tracking is vital for forecasting your available cash.

Sales Tax Obligations

Sales tax is a major point of confusion for many sellers. The good news for US sellers is that Marketplace Facilitator laws in nearly all US states require Amazon to calculate, collect, and remit sales tax on behalf of third-party sellers. This means that for sales made on the Amazon platform, the sales tax liability is handled by Amazon, not you. The sales tax amounts you see on your settlement report are being collected and paid by Amazon directly to the states. This simplifies your obligations significantly, but it’s important to remember this only applies to sales on Amazon's marketplace, not your other sales channels like a personal Shopify store.

Scaling Your Accounting System with Your Business Growth

Building a robust Amazon FBA accounting system is a staged process that should evolve with your revenue. Attempting to use a day-one method for a seven-figure business is a recipe for financial obscurity. The pattern across e-commerce clients is consistent: the approach must match the scale.

For US e-commerce companies, the journey typically follows three stages:

1. Stage 1: Pre-$20k/month. At this stage, a manual summary journal entry in QuickBooks for each payout is sufficient. Focus on mastering the process, setting up a clear Chart of Accounts, and correctly separating COGS from OPEX. The key is to build good habits early, ensuring you understand the fundamentals of your profitability before complexity increases.
2. Stage 2: $20k - $100k/month. As order volume increases, manual entry becomes unsustainable and prone to error. This is the time to implement an automation tool. The monthly cost of a service like A2X is easily offset by the time saved, the accuracy gained, and the ability to make better decisions with reliable data. The transition is a matter of when, not if.
3. Stage 3: $100k+/month. With clean, automated data flowing into your accounting software, your focus should shift from reconciliation to deep analysis and strategic planning. Use the reliable financial data to analyze SKU-level profitability, forecast inventory needs using inventory KPIs, and build a robust cash flow model. This is where accounting moves from a compliance task to a strategic advantage.

By matching your accounting methods to your growth stage, you ensure your financial data remains a reliable tool for making critical business decisions. Continue at the hub for Inventory & Fulfilment Cost Accounting.

Frequently Asked Questions

Q: What is the difference between an Amazon Settlement Report and a Payout Summary?
A: The Payout Summary shows the top-level numbers for a settlement period, like the total deposit amount. The Settlement Report is the detailed, transaction-level file that breaks down that summary. It lists every single sale, fee, refund, and adjustment, making it the essential document for accurate bookkeeping and reconciliation.

Q: Do I need an accountant if I use an automation tool like A2X?
A: Automation tools handle the data entry and reconciliation, but they do not replace the need for professional oversight. An e-commerce accountant can help you set up your Chart of Accounts correctly, ensure fees are allocated properly, provide strategic financial advice, manage tax planning, and interpret the data to help you grow your business.

Q: How do I account for Amazon inventory that is in transit to a fulfillment center?
A: Inventory in transit should be tracked in a separate current asset account on your balance sheet, often called "Inventory in Transit." Once Amazon confirms receipt of the shipment at their fulfillment center, you would create a journal entry to move the value from the "Inventory in Transit" account to your primary "Inventory" asset account.