E-commerce Bookkeeping Guide

Here we will talk about E-Commerce bookkeeping. Obviously we mean virtual E-Commerce bookkeeping. Then a question came forward: what is virtual bookkeeping?

Word virtual means not present physically or remote. So virtual bookkeeping means
maintaining a book of any business or any other organization from remote or not presented physically. That means virtual bookkeeping allows an accountant or bookkeeper to provide accounting services for a client remotely.

How does virtual bookkeeping work?

A virtual bookkeeper requires something for handling a book. First, he or she requires bank or credit card statements. They also required other information like bills and invoices virtually. They can use some online applications for recording bills. Hubdoc is a popular app for recording bills.

They use bank feed to add or match transactions. Virtual bookkeepers work primarily on bank feed. They also ask their clients for specific information. Sometimes they send their clients a list of ‘unidentified transactions’ to get additional information. Say, for example, if the bookkeeper is not sure about an expense, whether it is a supply expense or other expense. In this situation, he or she asks the client about the transaction type.

E-commerce Bookkeeping

E-commerce, also known as electronic commerce or internet commerce, refers to the buying and selling of goods or services using the internet, and the transfer of money and data to execute these transactions.

Things to consider for E-Commerce bookkeeping

At the beginning, one should go for service businesses. As they don’t have any inventory.

1. Recording Merchant Fees

Under merchant fees, bookkeepers have to consider Shopify fees, PayPal fees, stripe fees. E-commerce platforms and payment processors are two major partners of e-commerce. They get a small cut of every sale you make online. In this way, they earn money.

On the other hand, as a seller, you get money deposited into your bank account. But, remember those amounts are gross are the sum of net sales instead of gross sales.

2. Tracking Inventory

You can do e-commerce in two formats. Those are either drop shipping or by storing your own inventory.

3. Foreign Sales

When you sell products or services in various countries, then you have to face foreign currency issues. You also have to know the exact conversion rate that your e-commerce platform uses to convert between different currencies.

4. Shipping Fees

Another outgoing means of money is shipping fees. E-commerce providers will likely take a cut from the transaction.

5. Sales Tax

As a seller, you collect sales tax from your customers. So, this is a source of money. But, be careful sales tax money is not revenue, rather it’s a liability. You owe it to the respective government. You have to record the difference in gross sales, sales tax, merchant fees and the final deposit on your bank statement.

Shopify

It’s an e-commerce platform for online stores. What to remember in Shopify bookkeeping?

1. Set up your accounting app for Shopify say, for example, Quickbooks online for Shopify.

• Payment processor (Shopify payba, Amazon payee)
• Chart of account
• Streamlining PayPal setting (Connect PayPal in Shopify)
• Adding sells to Quickbooks online

2. QBO Bank Feeds

Matching Shopify deposit in bank feed and other Shopify payment processors like PayPal and Amazon pay.

3. Reconciling Accounts

Sales:

Income
Returns and refunds fees
Sales Tax

Deposits:

Shopify
Amazon
Stripe
PayPal Fees

4. Adjusting Inventory Balance

Inventory balance in QBO should be adjusted every month to the total cost amount of unsold inventory.

5. Understanding Sales Taxes

Sales taxes can be very complicated and confusing for Shopify sellers.

To record received sales tax from customers, debit your cash accounts, and credit your sales revenue and sales tax to the government, you can reserve your initial journal entry. To do this, debit your sales tax payable account and credit your cash account.

Chart of Accounts

Account Name Account Type

Shopify Sales                                                        Income
Shopify discount                                                  Income
Shopify refund                                                     Income
Shopify shipping income                                   Income
Shopify fees                                                          Cost of goods sold
Inventory Other                                                   Current assets
Shopify Pending Balances                                 Other current assets
Shopify Gift Card Liabilities                             Other  current Liabilities
Shopify Sales Tax Collected                              Other current Liabilities
Shopify Payment Clearing                                Other current assets
Shopify PayPal Clearing                                    Other current assets
Shopify Amazon Pay Clearing                          Other current assets
Affirm Clearing                                                   Other current assets
AfterPay Clearing                                               Other current assets
Kiama Clearing                                                   Other current assets
Paypal Fees                                                          Cost of Goods Sold
Amazon Pay Fees                                               Cost of Goods Sold
Affirm Fees                                                          Cost of Goods Sold
AfterPay Fees                                                      Cost of Goods Sold
Klama Fees                                                          Cost of Goods Sold

Why is it require?

No to:
Detailed Transactions
Fees and deductions not separated
No reconciliation of amounts deposited
Wrong/ bad account mapping
Inventory Sync

Yes to:

Summarized totals to QBO
Recorded fees and deductions,
Reconciliation of amount deposited,
Mapped accounts correctly,
Inventory sync