Ecommerce Bookkeeping
Inventory Accounting for Ecommerce: COGS, FIFO and Write-Downs
Quick answer
Inventory accounting records product purchases as an asset, then moves cost to cost of goods sold as items sell, using a costing method such as FIFO. Landed cost includes freight and duties, not just the supplier price. Count and value inventory regularly, write down stock that will not sell at cost, and your margin and tax numbers stay honest.
Ecommerce owners often meet inventory accounting at tax time, when the CPA asks for ending inventory and the answer is a guess. The fix is a monthly rhythm: record purchases to inventory, move cost to COGS as orders ship, and adjust for what breaks, goes missing or will never sell. This guide stays practical; method choices belong to your CPA.
Inventory is an asset until it sells
A $10,000 stock purchase is not a $10,000 expense. It converts cash into inventory. Profit is affected only when units sell, when their cost moves to cost of goods sold. Record purchases as expenses instead and a big restock month looks like a loss while a good sales month looks artificially profitable. Neither helps you price or plan.
Landed cost: what a unit really costs
The supplier invoice is only part of the cost. Freight, insurance, duties and receiving costs belong in inventory value too, allocated across the units they delivered. A product bought at $8 that costs $2.40 to ship and clear customs has a landed cost of $10.40, and pricing off $8 quietly gives away margin.
Costing methods in brief
- FIFO. The oldest units are treated as sold first. Common, intuitive, and matches how most stock physically moves.
- Weighted average. All units share one average cost, recalculated as stock arrives. Smooths price swings.
- Specific identification. Each unit carries its own cost. Suits high-value, low-volume items.
Pick one with your CPA and stay consistent; switching methods changes reported profit and usually needs their sign-off.
Write-downs, shrinkage and counts
Stock that is damaged, expired or unsellable at cost should be written down, so the balance sheet does not carry fantasy value. A periodic count, yearly at minimum, quarterly for faster-moving stores, reconciles the system to the shelf and surfaces shrinkage. Returns that go back to stock move back into inventory at cost, not into a revenue bucket.
Where 3PLs change the picture
With a fulfillment center or FBA, inventory sits in someone else's warehouse but it is still yours on the balance sheet. Reconcile the 3PL's inventory reports to your books monthly, including inbound shipments in transit, and record fulfillment and storage fees as operating expenses, separate from product cost. Multi-channel sellers should keep one inventory truth across channels, as our [ecommerce bookkeeping guide](/blog/ecommerce-bookkeeping-amazon-shopify-sellers) describes.
How Mispar helps
Mispar records inventory purchases, landed costs and cost of goods in your own QuickBooks Online or Xero file, reconciles inventory reports from your store or 3PL each month, and flags write-down candidates for your CPA. [Bookkeeping for ecommerce](/industries/ecommerce) starts at $229/mo.
Frequently asked questions
Do I have to track inventory if I am small?
If you sell physical products, inventory accounting is generally required for accurate taxes. Your CPA confirms the method and thresholds that apply to you.
Which costing method is best?
FIFO suits most stores and matches physical flow. The best method is the one your CPA approves and you apply consistently.
How often should I count inventory?
At least yearly for taxes, quarterly or by cycle counts for stores with fast-moving or high-value stock.
Are Amazon FBA storage fees part of inventory cost?
Storage and fulfillment fees are generally operating expenses, separate from product cost. Inbound freight to get stock to Amazon is typically part of landed cost. Confirm treatment with your CPA.
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Written by
is a Senior Account Manager at Mispar who works directly with small business owners and freelancers to keep their books clean, reconciled, and tax-ready every month.
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