An ecommerce chart of accounts should make it easy to understand how your business is performing. However, many ecommerce businesses start with a standard QuickBooks chart of accounts. Then, they add new accounts whenever something does not fit. Over time, the accounting becomes difficult to understand.
There is no single standardized ecommerce chart of accounts that works for every seller. The right structure depends on where you sell and how you process payments. Inventory and reporting needs also affect how you should organize your accounts.
The goal is not to create more accounts. Instead, the goal is to create useful financial information.
Separate Ecommerce Revenue the Right Way
Most ecommerce businesses should be able to identify revenue from their major sales channels. For example, an Amazon seller that also sells through Shopify may want to track those sales separately.
Depending on the business, revenue accounts might include:
- Amazon Sales
- Shopify Sales
- Walmart Sales
- eBay Sales
- Other Ecommerce Sales
However, more detail is not always better. A business with hundreds or thousands of SKUs does not need a separate general ledger account for every product. Instead, QuickBooks classes, locations and ecommerce platform reports can provide additional detail. This approach keeps the chart of accounts manageable.
Gross Sales Are Not the Same as Deposits
This is one of the most common ecommerce accounting problems.
Amazon, Shopify and other platforms typically deposit an amount that differs from gross sales. Before the money reaches your bank account, the platform may deduct fees, refunds, chargebacks and other amounts.
As a result, recording the bank deposit as revenue can understate both sales and expenses.
A properly structured ecommerce chart of accounts separates gross sales, refunds, fees and other activity. The net amount should then reconcile to the actual deposit.
Ecommerce Clearing Accounts
Clearing accounts can play an important role in ecommerce accounting.
For example, an Amazon clearing account can capture the activity included in an Amazon settlement before the money reaches the bank. Shopify, PayPal and other payment processors may require similar accounts.
In effect, these accounts create a bridge between the ecommerce platform and your bank account.
However, a clearing account should eventually clear. Old balances that continue to accumulate often signal a problem. Transactions may be missing, duplicated or mapped incorrectly.
Marketplace and Payment Processing Fees
Marketplace fees should remain separate from sales.
Depending on the business, the chart of accounts may include:
- Amazon marketplace fees
- Shopify fees
- Payment processing fees
- Fulfillment fees
- Storage fees
- Other selling fees
Again, you do not need a separate account for every fee a platform charges. The level of detail should depend on whether the information helps you understand and manage the business.
Inventory and Cost of Goods Sold
For businesses that sell physical products, inventory and cost of goods sold are two of the most important parts of an ecommerce chart of accounts.
A business generally records inventory purchased for resale as an asset until it sells the product. At that point, the appropriate cost moves to cost of goods sold.
However, inventory cost may include more than the supplier’s invoice price. Freight, tariffs, customs duties and other costs can affect the true landed cost of a product.
If you do not capture those costs correctly, your gross margin can be misleading.
Refunds, Returns and Chargebacks
Refunds and returns should remain visible in the accounting system rather than disappearing inside net sales.
Separating this activity makes it easier to identify return trends. It also makes reconciling gross sales to the ecommerce platforms easier.
Depending on their frequency and significance, chargebacks may also deserve separate treatment.
Sales Tax Belongs on the Balance Sheet
Sales tax collected from customers generally is not revenue.
When your business collects sales tax that it must remit, the amount generally creates a liability. That liability remains until you pay the appropriate taxing authority.
However, marketplace facilitator rules add another layer to ecommerce sales tax. Platforms such as Amazon may collect and remit tax on certain transactions themselves. Therefore, your accounting system needs to distinguish between sales tax your business owes and amounts the marketplace handles.
Don’t Overbuild Your Ecommerce Chart of Accounts
A common mistake is assuming that more detail creates better accounting.
It doesn’t.
An ecommerce chart of accounts with hundreds of narrowly defined accounts can quickly become difficult to maintain. It can also make your financial statements harder to understand.
Before creating another account, ask whether you actually need that information on your financial statements. Sometimes a QuickBooks class, location or ecommerce platform report provides a better solution.
A Good Ecommerce Chart of Accounts Should Make the Business Easier to Understand
There is no universal ecommerce chart of accounts. A $1 million Shopify business may need a different structure than a $20 million seller operating across Amazon, Walmart and its own website.
However, the objective remains the same.
Your chart of accounts should make it easy to understand sales, fees, inventory, cost of goods sold and profitability. At the same time, your accounting records should reconcile to your ecommerce platforms and bank accounts.
If your chart of accounts makes the business harder to understand, it probably needs to be simplified or restructured.