Accounting for Amazon FBA Sellers
Before You Start
Amazon FBA accounting requires QuickBooks Online Plus or Xero Standard at minimum, because you need inventory tracking capabilities to manage COGS for products stored in Amazon's warehouses. You also need an integration app designed for Amazon's complex fee structure. A2X for Amazon ($19 to $99/month) or Link My Books ($17 to $65/month) are the two leading options. Both connect to your Amazon Seller Central account and your accounting software, automatically creating detailed journal entries for each settlement period.
Before connecting the integration, customize your chart of accounts with Amazon-specific categories. Create these expense accounts at minimum: Amazon Referral Fees, FBA Fulfillment Fees, FBA Storage Fees, Amazon Advertising Costs, and Amazon Other Fees. Create an income account for Amazon Sales separate from any other channel revenue. If you sell in multiple Amazon marketplaces (US, Canada, UK, EU), create separate income and fee accounts for each marketplace to track profitability by region.
Step-by-Step Setup
Create an A2X or Link My Books account and connect it to your Amazon Seller Central using the MWS or SP-API authorization process. The app needs permission to read your orders, settlements, and financial reports. Then connect the app to your accounting software (QuickBooks or Xero). The initial connection may import historical settlements going back 12 to 24 months, which is useful for cleaning up past bookkeeping but can create a large number of entries to review. You can choose to import only from a specific date forward if your prior books are already handled.
The integration app presents a mapping screen where you assign each Amazon revenue and fee type to the corresponding account in your accounting software. Map Product Sales to Amazon Sales Revenue. Map Referral Fees to Amazon Referral Fees expense. Map FBA Per Unit Fulfillment Fees to FBA Fulfillment Fees expense. Map Storage Fees to FBA Storage Fees expense. Map Advertising spend to Amazon Advertising expense. Map Refunds to a Refunds contra-revenue account. Map Reimbursements to an Amazon Reimbursements income account (or offset against the original fee category). Take time with this mapping step because it determines the accuracy of every future entry.
A2X creates one journal entry per Amazon settlement period (typically every 14 days). Each entry contains every line item from the settlement, grouped by type. A single settlement entry might include: $12,450 in product sales, $1,870 in referral fees, $1,245 in FBA fulfillment fees, $380 in advertising costs, $125 in storage fees, $420 in refunds, $85 in reimbursements, and $8,495 net deposit. The journal entry balances because all debits and credits net to the deposit amount that hits your bank account. Set the app to create entries automatically or queue them for review before posting.
Track inventory at Amazon's fulfillment centers separately from inventory in your own warehouse or with other fulfillment providers. When you ship products to Amazon FBA, record an inventory transfer: decrease your warehouse inventory and increase your FBA inventory by the same amount. The total inventory on your balance sheet stays the same, but you know how much is where. Amazon's Inventory Adjustments report shows units lost, damaged, found, or disposed of within their warehouses. Record these adjustments as inventory shrinkage (a COGS expense) and track reimbursements received for lost units as separate income.
When each settlement deposits to your bank, match the bank feed entry against the journal entry created by the integration app. The amounts should match exactly. If they do not, check for timing differences (the settlement may span a date boundary differently than your bank's posting date) or unrecorded manual adjustments. Pull the settlement report directly from Seller Central (Reports, then Payments, then All Statements) and compare line by line against the journal entry if there is a discrepancy. Monthly, compare your total Amazon revenue and fees in your accounting software against the Amazon Monthly Revenue report to verify the full picture.
Understanding Amazon's Fee Structure
Referral Fees
Amazon charges a referral fee on every sale, calculated as a percentage of the total sale price (including shipping charged to the customer). The percentage varies by category: most categories are 15%, but some range from 8% (consumer electronics) to 45% (Amazon device accessories). On a $30 product sale, a 15% referral fee is $4.50. This is Amazon's commission for providing the marketplace and customer base, and it is one of the largest expenses for most Amazon sellers.
FBA Fulfillment Fees
FBA fulfillment fees cover picking, packing, shipping, and customer service for each unit Amazon fulfills. Fees are based on the product's size tier and shipping weight. A standard-size item weighing under one pound costs approximately $3.22 per unit to fulfill. Oversize items cost $9.73 and up. These fees are charged per unit shipped, including for replacement units sent for customer service issues. For a seller shipping 1,000 units per month at $3.22 per unit, FBA fulfillment fees are $3,220 per month.
Storage Fees
Monthly storage fees are charged based on the daily average volume (in cubic feet) your inventory occupies in Amazon's warehouses. Standard-size storage costs $0.87 per cubic foot from January through September and $2.40 per cubic foot from October through December (peak season). Long-term storage fees apply to inventory that has been in Amazon's warehouses for over 365 days, charged at $6.90 per cubic foot or $0.15 per unit, whichever is greater. Managing inventory levels to avoid long-term storage fees is a critical cost control strategy for FBA sellers.
Advertising Fees
Amazon PPC advertising costs (Sponsored Products, Sponsored Brands, Sponsored Display) are deducted from your settlement. These costs are recorded separately from your organic sales because advertising is an operating expense, not a sales commission. Track advertising spend by campaign or at minimum by product to evaluate advertising return on investment. A product spending $500 per month on PPC to generate $2,000 in sales has a 25% ACoS (advertising cost of sales), which may or may not be profitable depending on your margins.
Other Fees
Amazon charges numerous additional fees that appear in your settlement: refund administration fees (Amazon keeps a portion of the referral fee when you refund a customer), removal and disposal fees for inventory you pull out of FBA, labeling and prep fees if Amazon labels your products, return processing fees for certain categories, and high-volume listing fees if you have over 100,000 active listings. Each fee type should map to an expense account in your accounting software so you can track and analyze your total Amazon costs.
Handling Amazon Reimbursements
Amazon reimburses sellers for inventory lost or damaged in their fulfillment centers. These reimbursements appear in your settlement report and should be recorded as income (Amazon Reimbursements) or as an offset to your inventory shrinkage expense. The net effect is that you are compensated at the unit's selling price minus Amazon's fees, which means you receive less than your selling price but more than your cost.
Amazon does not always reimburse automatically. Review the Inventory Adjustments report monthly and compare units received versus units available, sold, and returned. If units are missing without a corresponding reimbursement, you can open a case with Amazon Seller Support requesting investigation. Many sellers recover thousands of dollars per year in unreimbursed lost inventory by monitoring these reports regularly.
When recording reimbursements, also adjust your inventory records. If Amazon lost 10 units and reimbursed you, reduce your FBA inventory quantity by 10 units and record the cost of those units as inventory shrinkage. Record the reimbursement amount as income. The net impact on your profit depends on whether the reimbursement covers your full cost, which it usually does for lost inventory but may not for damaged inventory that is returned and disposed.
Amazon 1099-K Reconciliation
Amazon issues a 1099-K reporting the total gross payment volume processed through your seller account. This number includes gross sales, shipping charged to customers, and gift wrap charges, but does not deduct referral fees, FBA fees, advertising costs, or any other charges. The 1099-K amount will be significantly higher than your actual revenue because Amazon's fees are substantial.
If your accounting records show $200,000 in Amazon revenue but your 1099-K shows $280,000, the $80,000 difference represents the fees Amazon deducted before your settlement deposits. Your tax return needs to reconcile these numbers by showing $280,000 in gross revenue and $80,000 in Amazon fees as deductions. If you recorded only net deposits as revenue ($200,000), the IRS sees an $80,000 gap between your reported income and your 1099-K, which triggers questions.
This is the most important reason to use an integration app that records gross sales and fees separately. The integration automatically creates the correct accounting entries that reconcile with the 1099-K, eliminating the year-end headache of trying to explain the discrepancy.
Multi-Marketplace Accounting
If you sell on Amazon US, Canada, UK, Germany, or other marketplaces, each marketplace generates its own settlement reports, has its own fee structures, and settles in its own currency. Your accounting needs to handle each marketplace separately with currency conversion for international accounting.
A2X and Link My Books both support multi-marketplace Amazon accounting. They create separate journal entries for each marketplace, handle currency conversion at the daily exchange rate, and map each marketplace's fees to the appropriate accounts. If you sell in four Amazon marketplaces, expect four separate settlement entries per settlement period, each with its own revenue, fees, and deposit in the local currency converted to your reporting currency.