Selling on Amazon can look simple from the outside. Products sell, Amazon collects the money, fees are deducted, and deposits show up in your bank account.
But from a bookkeeping point of view, Amazon is not simple.
For Canadian businesses, Amazon bookkeeping requires careful tracking of sales, refunds, fees, inventory, cost of goods sold, GST/HST, advertising, storage fees, and marketplace deposits. If these numbers are not recorded properly, your financial reports can become misleading very quickly.
Many Amazon sellers make the mistake of recording Amazon deposits as total sales. That creates a serious problem because the amount deposited into your bank account is usually after Amazon fees, refunds, shipping charges, advertising costs, storage fees, and other adjustments.
Clean bookkeeping helps you understand your real profit, prepare accurate tax filings, manage cash flow, and make better business decisions.
Why Amazon Seller Bookkeeping Is Different
A normal business may send invoices, collect payments, and record expenses separately. Amazon sellers deal with a more complicated structure.
Amazon acts as a marketplace, payment processor, fulfillment provider, advertising platform, and fee collector. This means one Amazon payout may include several different transactions bundled together.
For example, one Amazon settlement may include:
Sales revenue
Refunds
Referral fees
FBA fees
Storage fees
Advertising charges
Shipping credits
Promotional rebates
Inventory reimbursements
Marketplace facilitator tax adjustments
Reserve balances
Final deposit amount
If you only record the bank deposit, your books will not show the full picture. Your sales may be understated, your expenses may be hidden, and your gross margin may be wrong.
For Canadian Amazon sellers, this can also affect GST/HST reporting, income tax reporting, inventory valuation, and year-end financial statements.
What Canadian Amazon Sellers Need to Track
1. Gross Sales
The first number to track is gross sales before Amazon deducts anything.
Gross sales show your true revenue activity. Even if Amazon only deposits the net amount into your bank account, your bookkeeping should still capture the full sales amount.
This helps you understand:
Total revenue
Sales trends
Marketplace performance
Product performance
GST/HST exposure
Business growth
If you sell in Canada, the U.S., or multiple marketplaces, sales should be separated by marketplace where possible. This makes reporting much cleaner.
2. Amazon Fees
Amazon charges many types of fees. These should not be ignored or lumped together without review.
Common Amazon fees include:
Referral fees
Fulfillment by Amazon fees
Monthly subscription fees
Storage fees
Long-term storage fees
Inbound placement service fees
Removal order fees
Refund administration fees
Advertising fees
Shipping fees
Label service fees
These fees directly affect profitability. A product may look profitable based on selling price alone, but after Amazon fees, storage fees, returns, and ads, the margin may be much smaller than expected.
Good bookkeeping separates these fees so you can see where your money is going.
3. Refunds and Returns
Returns are a major part of Amazon selling. Refunds need to be recorded properly because they reduce revenue and may also involve additional Amazon charges.
You should track:
Customer refunds
Returned inventory
Refund administration fees
Damaged inventory
Unsellable returns
Reimbursements from Amazon
Restocking adjustments
If returns are not tracked properly, you may overstate sales and understate losses. For high-return categories, this can seriously distort your profit.
4. Advertising Costs
Amazon PPC advertising can be one of the biggest expenses for sellers. Advertising costs should be recorded separately from other Amazon fees.
Tracking ad spend helps you understand whether your campaigns are actually profitable.
Important numbers include:
Total ad spend
Advertising cost of sales
Sales generated from ads
Organic sales compared to paid sales
Product-level profitability after ads
A product may generate high revenue but still lose money after advertising. This is why ad costs should be reviewed monthly.
5. Amazon Deposits and Settlement Reports
Amazon deposits are not the same as sales.
Each deposit should be matched to an Amazon settlement report. The settlement report explains how Amazon calculated the final payout.
A proper bookkeeping process should include:
Downloading settlement reports
Matching deposits to bank transactions
Recording gross sales
Recording Amazon fees
Recording refunds
Recording adjustments
Recording reserves
Reconciling the final payout
This process helps ensure that every Amazon deposit is supported by a clear breakdown.
6. GST/HST Tracking
Canadian Amazon sellers need to pay close attention to GST/HST.
If your business is registered for GST/HST, you need to track taxable sales, zero-rated sales, exempt sales, and input tax credits. If you are not registered, you still need to monitor whether your sales cross the small supplier threshold.
GST/HST treatment can become more complex when selling through different marketplaces, provinces, or countries. Amazon may collect certain taxes in some situations, but that does not mean your business has no reporting responsibility.
Your bookkeeping should help answer:
Are sales taxable?
Which province is the customer in?
Is Amazon collecting tax?
Are you required to remit GST/HST?
Are you claiming input tax credits correctly?
Are U.S. or international sales separated?
For Canadian sellers, this is one area where bookkeeping and tax advice should work together.
7. Cost of Goods Sold
Cost of goods sold, also called COGS, is one of the most important numbers for Amazon sellers.
COGS represents the cost of the products you sold. It is different from inventory purchased.
For example, if you buy 1,000 units but only sell 300 units, only the cost of those 300 sold units should usually be recorded as cost of goods sold. The remaining 700 units stay in inventory.
COGS may include:
Product purchase cost
Freight and shipping to warehouse
Customs and duties
Packaging costs
Inspection costs
Prep centre fees
Labeling costs
Other direct costs needed to get inventory ready for sale
If COGS is not recorded correctly, your profit can be completely wrong.
Amazon Inventory Management Methods
Inventory is one of the most important areas of Amazon bookkeeping. Many sellers focus only on sales, but inventory is where a lot of profit gets hidden or lost.
Inventory management affects cash flow, profitability, tax reporting, and business planning.
1. Periodic Inventory Method
Under the periodic inventory method, inventory is updated at specific intervals, such as monthly, quarterly, or year-end.
The seller records purchases during the period and then adjusts inventory after counting or reviewing stock levels.
Basic formula:
Beginning inventory
Plus purchases
Minus ending inventory
Equals cost of goods sold
This method is simpler and may work for smaller Amazon sellers, but it has limitations. You may not know your real-time inventory value during the month, and errors may only be caught later.
Periodic inventory can work if:
You have a small number of SKUs
Sales volume is low
Inventory movement is easy to review
You complete regular month-end checks
You keep strong purchase records
However, as your Amazon business grows, this method may become too basic.
2. Perpetual Inventory Method
The perpetual inventory method updates inventory continuously as products are purchased and sold.
Each sale reduces inventory and records cost of goods sold. Each purchase increases inventory.
This method gives a much clearer view of your business.
Benefits include:
Better real-time inventory tracking
More accurate gross profit
Easier reorder planning
Better product-level reporting
Faster detection of stock issues
Cleaner month-end bookkeeping
For serious Amazon sellers, perpetual inventory is often the better method, especially if you have many SKUs, high sales volume, or multiple marketplaces.
Software tools can help automate this process, but the setup must be done carefully.
3. FIFO Method
FIFO means first in, first out.
Under FIFO, the oldest inventory costs are assigned to the products sold first. This method is commonly used when products move in a natural order.
For example, if you purchased 100 units at $10 and later purchased another 100 units at $12, FIFO assumes the $10 units are sold first.
FIFO can be useful when:
Inventory has expiry dates
Products are seasonal
Older stock should move first
Costs change over time
You want a logical flow of inventory
In periods of rising costs, FIFO may result in lower cost of goods sold and higher reported profit because older, cheaper inventory is treated as sold first.
4. Weighted Average Cost Method
The weighted average method calculates an average cost for inventory items.
Instead of tracking each unit by exact purchase batch, the total cost of goods available is divided by the total units available.
For example:
100 units at $10 = $1,000
100 units at $12 = $1,200
Total cost = $2,200
Total units = 200
Average cost = $11 per unit
When a unit is sold, the cost recorded is $11.
This method is often practical for Amazon sellers who buy similar products in batches where exact unit tracking is not necessary.
Weighted average can be useful when:
You sell identical products
Purchase costs fluctuate
You want simpler inventory costing
You have frequent restocking
Batch-level tracking is difficult
The key is consistency. Once you choose an inventory costing method, you should apply it consistently.
5. SKU-Level Inventory Tracking
Amazon sellers should track inventory by SKU, not just total inventory value.
SKU-level tracking helps identify which products are profitable and which ones are creating problems.
You should track:
Units purchased
Units sold
Units returned
Units damaged
Units lost
Units reimbursed
Units in FBA warehouse
Units in transit
Units at prep centre
Units on hand
Cost per unit
Selling price per unit
Gross margin per SKU
Without SKU-level tracking, you may know total profit but not which products are driving it.
6. Landed Cost Tracking
Landed cost means the full cost of getting inventory ready for sale.
Many sellers only record the supplier invoice as product cost. That is incomplete.
Landed cost may include:
Supplier product cost
International freight
Domestic freight
Customs duties
Brokerage fees
Currency conversion costs
Packaging
Inspection
Prep centre fees
Amazon inbound shipping
Labeling
If these costs are not included, your product margins may look better than they really are.
For example, a product purchased for $8 may actually cost $11 after freight, duty, prep, and packaging. If your bookkeeping only records $8 as the cost, your profit report will be misleading.
7. Inventory Reconciliation
Inventory should be reconciled regularly.
This means comparing your bookkeeping records to Amazon inventory reports and physical or supplier records.
Common inventory differences happen because of:
Lost inventory
Damaged inventory
Customer returns
Amazon warehouse adjustments
Reimbursements
Removal orders
Disposals
Inbound shipping differences
Counting errors
A monthly inventory reconciliation helps catch these issues before they become large problems.
Monthly Bookkeeping Checklist for Amazon Sellers
A good monthly process should include:
Download Amazon settlement reports
Reconcile Amazon deposits to bank account
Record gross sales
Record refunds and returns
Separate Amazon fees by category
Record advertising costs
Update inventory purchases
Record cost of goods sold
Review inventory on hand
Reconcile Amazon inventory reports
Track GST/HST properly
Review profit by SKU or product group
Check currency exchange if selling outside Canada
Review accounts payable to suppliers
Prepare monthly profit and loss report
This process gives you a much clearer picture than simply recording deposits.
Common Amazon Bookkeeping Mistakes
Many Canadian Amazon sellers run into the same issues.
The most common mistakes include:
Recording deposits as sales
Ignoring Amazon fees
Not tracking inventory properly
Recording inventory purchases directly as expenses
Not separating refunds
Not tracking advertising costs
Missing GST/HST obligations
Mixing personal and business expenses
Not reconciling settlement reports
Not reviewing product-level profitability
These mistakes can lead to inaccurate tax filings, poor decisions, cash flow problems, and expensive cleanup work later.
Final Thoughts
Amazon bookkeeping is more than recording deposits.
Canadian Amazon sellers need to track sales, fees, refunds, advertising, GST/HST, inventory, cost of goods sold, and marketplace settlements properly. Inventory management is especially important because it directly affects profit, cash flow, and tax reporting.
Whether you use the periodic method, perpetual method, FIFO, or weighted average costing, the most important thing is to have a consistent system that gives you reliable numbers.
Clean books help you answer the real questions:
Which products are profitable?
How much are Amazon fees costing you?
Are ads helping or hurting?
Is inventory tying up too much cash?
Are GST/HST records accurate?
Is the business actually making money?
For Amazon sellers in Canada, strong bookkeeping is not just about tax season. It is about understanding your business every month so you can grow with confidence.
