Posting Amazon Revenues with Negative Settlements

This article deals with posting those bi-weekly Amazon revenues statements (payment statements) into your books. However, in this scenario, we will deal specifically with a periodic statement (from Amazon) that nets out to a negative amount.

When there is a negative settlement, then Amazon should debit your bank account instead of crediting it for that period’s settlement.

As a reminder: It is always a good idea to recognize the following bi-weekly Amazon summary activity into your books:

Product Charges (product sales)
Shipping (income)
Amazon Fees
Inventory changes (this can probably be posted to some sort of shrinkage account)
Refunded Amazon Fees
Refunded Sales
Promo Rebates
FBA Fees
Shipping charges (expenses)

Typically, the net of all this activity is a positive amount and is what will be deposited into your bank account on a periodic basis. I would highly recommend that you always find a way to recognize what Amazon is charging you to earn those net deposits. You will also want to know your true gross sales as opposed just to these net deposits.

Now, sometimes, the net Amazon gross sales and corresponding expenses (COGS) activities will be upside down for that period, so Amazon will have spent more money trying to sell your products as opposed to what they received in proceeds. They will debit your bank account for this at some point.

Per my previous article titled “Amazon Revenues,” I furnished instructions on how to post typical summary sales-related activity (for a period) in your bookkeeping. Here is a recap:

So, one way to accomplish this in your books is to start out by creating relevant and specific income and Cost of Goods Sold accounts in your Chart of Accounts (to recognize just this Amazon activity). You will also create corresponding income and expense (Cost of Goods Sold) service items in your (QuickBooks Online) Products and Services list. These new items, of course, will point to those new Amazon income and expense (COGS) accounts you created above.

Next to start posting the summary totals from a typical (PDF) Amazon Payment Statement:

Create a new customer called “Amazon” or “Amazon Seller Account” or something like this.
Next, create an invoice for this customer name and fill in each line item of the invoice, as per all the line items on the Amazon payment statement (i.e. Product charges, Shipping income, refunded expenses, refunded sales, promo rebates, FBA fees, shipping fees and of course Amazon fees).
Each line item’s dollar amount should correspond exactly as to the Amazon Payment Statement.
The net total of this invoice should match exactly as the net proceeds total at the bottom of the Amazon payment statement.
Finally, just simply match your automatic bank deposit to this open invoice.

Now, to deal with the matter of a negative Amazon settlement, you will do the additional following:

Create an additional bank type of account in your Chart of Accounts. You can title this something like “Temporary Holding Account.”
Create a service item called “Amazon Adjustments” or something like this and have this item pointing directly to that new temporary holding bank type of account you created above.
Within this period’s Amazon invoice, add an extra line item using this new service item you created above and be sure to enter that negative settlement amount as a POSITIVE amount in that line item. Now you can finish creating your Amazon invoice for the period since your bookkeeping software may not allow you to create negative invoices. This particular invoice is a zero invoice so no payment from Amazon will be applied to this.
When Amazon deducts that negative amount from your bank account later, just apply (expense) this debit directly to that Temporary Holding Account you created above. If you did everything right, your Temporary Holding Account should have a zero balance now.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.