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Amazon Seller Profit And Loss Statement

Amazon Seller Profit and Loss Statement: A Complete Guide

As a merchant selling products on Amazon, you might be selling a huge volume of products on Amazon and as a result, you may be expecting huge profits on sales. However, when you analyze your income statement, you realize that the profits you generated through those sales were way too low. They were so minuscule that you were planning to stop selling on Amazon altogether.

Now, why does this happen? Why do you land making inadequate profits despite having huge sales volumes on Amazon? That’s because you as a merchant are unaware of the fee or the transaction cost that Amazon is charging on each sale that you make. As a result, you fail to take into account all these costs when setting the selling price of your products on your Amazon Seller Central Account.

Thus, at the end of the year, when you receive Form 1099-K from Amazon showcasing the number of sales you made and the amount of sales tax you must pay to the state government where you have a tax nexus, you get overwhelmed and have no clue how to manage taxes.

To avoid this situation, it’s important that as an Amazon seller, you keep track of the expenses that Amazon charges on the sales you make and correctly report your total revenue and actual net income. It is the net income from which you will be paying taxes to the state government. Even if you don’t get a Form 1099-K, you have to report the income from the business and you need to include all your expenses. Otherwise, you would end up paying tax on money you never got.

Therefore, it’s extremely important for you to calculate profit and loss on your Amazon Seller Account. In this article, we are going to walk you through the process of creating an Amazon Seller Profit and Loss statement. We will also understand the various components of an Amazon Seller Profit and Loss Statement and how these impact your profit.

What Is Amazon Seller Profit And Loss Statement?

Amazon Seller Profit and Loss Statement is one of the three basic financial statements that you must prepare as an Amazon seller to represent all the items of income, expense, profit or loss, or other comprehensive income related to selling products on Amazon.

As an Amazon seller, you may earn revenues in ways that are different from other businesses like manufacturing. For instance, income from non-FBA sales and FBA product sales are the primary revenues that you generate by selling products on Amazon. Other incomes that you receive from Amazon include shipping credits and liquidation proceeds.

Likewise, the expenses that you may incur as an Amazon seller may vary relative to any other business. For instance, seller fulfilled selling fees, FBA selling fees and cost of advertising are the primary expenses that you have to incur on Amazon to sell your products. Other expenses that you incur include FBA transaction fees, other transaction fees, FBA inventory, and inbound Services Fees, shipping label purchases, and so on.

Thus, to know the outcome of all the operations that you carry out to sell products on Amazon during a particular period, you need to prepare a flow report called the profit and loss statement.

Since the Amazon Seller Profit and Loss Statement is a flow report, it has two segments. One of the segments represents the inflow of funds that result from the sale of products to consumers on the Amazon platform. The fund inflows refer to the assets that your business creates by generating revenues through selling products on Amazon. These assets include the cash that you receive from the customers once they purchase your products on Amazon.

The other segment of the Amazon Seller profit and loss represents the outflow of funds called expenses that are incurred to generate sales. The net excess of all the revenues over expenses represents the net income of your business during an accounting period. Whereas, the excess of all the expenses over revenues represents the net loss of your business.

This is not as simple as it sounds. Just like the profit and loss statement for any other business, the income and expenses are presented in different ways in the Amazon Seller profit and loss statement. This is to provide information that is relevant for economic decision-making.

Accordingly, income and expense items arising in the normal course of selling products on Amazon are shown separately as operating incomes and operating expenses. Operating Income is the income that you get after subtracting all the operating expenses from the net revenues. If the total net revenues that you generated from selling products on Amazon in the year 2023 was $10,000 where the Cost Of Goods Sold (COGS) was $2000, FBA selling fees were $1500, Storage Fees were $800, and Advertising Fees were $1000, then operating income would be net sales – cost of goods sold – operating expenses. This comes out to be $10,000 – $2000 – $1500 – $800 – $1000 = $4700.

Likewise, incomes and expenses arising other than the normal course of selling products on Amazon are shown separately as non-operating expenses and non-operating incomes. For instance, interest income is non-operating income and interest expense is non-operating expense.

This showcases that as an Amazon seller, you must create a profit and loss statement to understand how much profit or loss you are making when selling products on Amazon, what expenses you are incurring to sell these products, and how can you optimize these expenses to keep profits in check.

How To Create Amazon Seller Profit And Loss Statement?

To create an Amazon Seller Profit and Loss Statement, you first need to generate the Payout Report from your Amazon Seller account. This report will provide you with the data on the income and expenses that you need to showcase on your Amazon Seller Profit and Loss Statement.

How To Generate Amazon Seller Payout Report?

To generate the Payments Report from your Amazon Seller Account, you need to follow the steps below:

1. Log in to your Amazon Seller Central Account.

2. On your Amazon Seller Central dashboard, go to the ‘Reports’ tab and click on it. From the dropdown, click ‘Payments’.

3. Once the Payments page is showcased, click on the ‘Date Range Reports’ tab. Then click on the ‘Generate Report’ button.

4. Once you click on the ‘Generate Report’ button, a popup will be showcased. In that popup, check on ‘Summary’ and then under the ‘Select Reporting Range’ section, choose the month for which you want to generate the report. Once you do this, hit on the ‘Generate’ button below to generate the report.

Once the report gets generated, you can see four main quadrants in your Amazon Seller Payot Report. These include income, expenses, transfers, and taxes. You can use this data to create your Amazon Seller Profit and Loss Statement for the given accounting period.

The following is a simple Amazon Seller Profit and Loss Statement template that you can use and start accounting for all the incomes and expenses to calculate net profit.

Amazon Seller Profit And Loss Statement For The Year Ended December 31, 2023
Revenue 2022 2023
Sales xx xx
Less: Sales Returns xx xx
Less: Discounts and Allowances xx xx
Net Sales xx xx
Cost Of Goods Sold
Raw Material xx xx
Labor xx xx
Overhead xx xx
Total Cost Of Goods Sold xx xx
Gross Profit xx xx
Operating Expenses
Wages xx xx
Advertising xx xx
Repairs and Maintenance xx xx
Travel xx xx
Rent/Lease xx xx
Delivery/Freight Expenses xx xx
Utilities/Telephone/Internet Expenses xx xx
Insurance xx xx
Mileage xx xx
Office Supplies xx xx
Depreciation xx xx
Interest xx xx
Other Expenses xx xx
Total Operating Expenses xx xx
Operating Profit (Loss) xx xx
Add: Other Income xx xx
Interest Income xx xx
Other Income xx xx
Profit (Loss) Before Taxes xx xx
Less: Taxes xx xx
Net Profit (Loss) xx xx

Alan Chen Freecashflow.io

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What Are The Components Of Amazon Seller Profit And Loss Statement?

The following is the list of income and expense items that you as an Amazon seller must represent in a simple income statement for a given accounting period. We will consider the following Amazon Seller Paout Report to understand the various components of an Amazon seller Profit and Loss Statement.

Expenses Amount Income Amount
Seller Fulfilled Selling Fees $4200 Product Sales Non-FBA $400,000
Selling Fee Refunds ($2000) Product Sale Refunds Non-FBA ($300)
Other Transaction Fees $0 Shipping Credits $15000
Other Transaction Fee Refunds $0 Shipping Credit Refunds ($350)
Shipping Label Purchases $10,000 Gift Wrap Credits $600
Carrier Shipping Label Adjustments ($250) Gift Wrap Credit Refunds ($15)
Service Fees $2500 Promotional Rebates ($3500)
Refund Administration Fees

Adjustments

$400 Promotional Rebate Refunds $100
Cost of Advertising $500 A-to-Z Guarantee Claims $0
Refund for Advertiser $1000 Chargebacks $0
Liquidations Brokerage Fee $0 Amazon Shipping Reimbursement $0
SAFE-T Reimbursement $0

I. Revenues

Revenue in the Amazon seller profit and loss statement refers to the top line or sales that you make on Amazon. Sales refer to the invoice value of the products that you deliver to your customers during an accounting period. It simply represents the total amount of income that you earn as a seller from the sales of products on Amazon.

In other words, the value of invoices issued by the business is not the same as cash received. For instance, when you raise a customer invoice, it showcases in the income statement that work has been done. But, such an entry does not represent the receipt of cash from the customer.

Say, for instance, you are a non-FBA seller. As of December 31, 2023, your Amazon Seller payout report displays the following items.

Income Amount Expenses Amount
Product Sales Non-FBA $400,000 Seller Fulfilled Selling Fees $4200
Product Sale Refunds Non-FBA ($500) FBA Selling Fees
FBA Product Sales Selling Fee Refunds ($2000)
FBA Product Sale Refunds FBA Transaction Fees
FBA Inventory Credit FBA Transaction Fee Refunds
FBA Liquidation Proceeds Other Transaction Fees $0
FBA Liquidation Proceeds Adjustments Other Transaction Fee Refunds $0
Shipping Credits $15000 FBA Inventory and Inbound Services Fees
Shipping Credit Refunds ($50) Shipping Label Purchases $10,000
Gift Wrap Credits $600 Carrier Shipping Label Adjustments ($250)
Gift Wrap Credit Refunds ($15) Service Fees $2500
Promotional Rebates ($3500) Refund Administration Fees

Adjustments

$400
Promotional Rebate Refunds $100 Cost of Advertising $500
A-to-Z Guarantee Claims $0 Refund for Advertiser $1000
Chargebacks $0 Liquidations Brokerage Fee $0
Amazon Shipping Reimbursement $0
SAFE-T Reimbursement $0
Product Sales Non-FBA $400,000
Transfers Amount Taxes Amount
Transfers to Bank Account Product, Shipping, and Gift Wrap Taxes Collected
Failed Transfers To Bank Account Product, Shipping, and Gift Wrap Taxes Refunded
Disburse to Amazon Gift Card Balance Amazon Obligated Tax Withhold
Charges to Credit Card
Amazon Lending

Taking the above into consideration, your total revenue for the year ended December 31, 2023 is:

Revenue = Product Sales Non-FBA – Product Sale Refunds Non-FBA + Shipping Credits – Shipping Credit Refunds + Gift Wrap Credits – Gift Wrap Credit Refunds – Promotional Rebates + Promotional Rebate Refunds

Revenue = $400,000 – $500 + $15,000 – $50 + $600 – $15 – $3500 + $100 = $411,635

To understand how this is calculated, read the following section to understand each of the items that come under Amazon seller revenue.

1. Product Sales Non-FBA

As the name suggests, the Product Sales Non-FBA are the sales that you fulfill on Amazon as a merchant and not under the Fulfilled by Amazon (FBA) program.

Amazon FBA (Fulfillment by Amazon) is a service offered by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. With FBA, Amazon takes care of the entire order fulfillment process, including picking, packing, shipping, and customer service.

However, the Product Sales Non-FBA represents the sales that you fulfill as a merchant. That means you as a merchant selling products on Amazon take care of the entire order fulfillment process including picking, packing, shipping, and customer service.

Say, for instance, you as a merchant sell coffee mugs on Amazon. The Product Sales Non-FBA worth $400,000 represents the coffee mug sales that you fulfilled entirely under FBM over FBA, right from picking, and packing, to shipping, and customer service.

2. Product Sale Refunds Non-FBA

The Product Sale Refunds Non-FBA represents the amount of customer orders that have been returned to you by your customers due to some reason. The reasons may include that the customers did not like the design of the coffee mugs that they ordered or had issues with the size or they may have received the coffee mugs in bad condition.

Since customers returned the orders, you as a merchant get back the initially ordered coffee mugs. In return, you have to pay the amount against those ordered coffee mugs back to your customers. Since you are returning the cash, it is a debit amount and is deducted from the amount of your total Product Sales Non-FBA.

Considering the example above, as of December 31, 2023, your total Product Sales Non-FBA were $400,000, and the Product Sale Refunds Non-FBA were $500. This means on the total Non-FBA sales of $400,000, you had Non-FBA refunds of $500.

3. Shipping Credits

The Shipping Credits are only for those merchants who fulfill orders by themselves instead of fulfilling them under the FBA program.

Shipping Credits represent the amount that Amazon credits to the Amazon account of the merchants fulfilling the orders by themselves for the shipping charges that their customers pay for delivering the orders to the customers.

Taking the above example, as of December 31, 2023, your total Product Sales Non-FBA were $400,000, the Product Sale Refunds Non-FBA were $500 and the Shipping Credits were $15000. This means that for fulfilling the Product Sales Non-FBA worth $400,000, you charged your customers shipping fee worth $15,000.

Let’s take an example of a particular customer and try to understand how shipping credits work. Say, Ron purchased two coffee mugs from you on Amazon worth $500. Since the order was Fulfilled By Merchant (FBM) in place of FBA, you charged a shipping fee of $10 to deliver or ship the order to Ron’s doorstep. Thus, the total amount that Ron would pay to you for the order will be $510 ($500 + $10). That is $500 for the coffee mugs and $10 for the shipping charges. Thus the total of $510 will be credited to your Amazon account.

4. Shipping Credit Refunds

The Shipping Credit Refunds line item relates to the ‘Shipping Credits’ item. It represents the amount against the shipping fee on the customer orders that have been returned to you as a merchant due to some reason. This is the amount that you as a merchant charged customers for offering shipping service when they placed an order with you on Amazon and now you have to pay back or refund the customers as they returned the orders.

Since you refund the amount that the customers paid to you for the order when they placed it with you on Amazon, you also have to refund the shipping fee that the customers paid to you for delivering such an order.

Considering the above example, as of December 31, 2023, your total Product Sales Non-FBA were $400,000, Product Sale Refunds Non-FBA were $500, Shipping Credits were $15000, and Shipping Credit Refunds were $100. Thus, for the Product Sale Refunds Non-FBA worth $500, the shipping fee that you refunded was $100.

Let’s take the example of Ron again and try to understand how shipping credit refunds work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. Since the order was Fulfilled By Merchant (FBM) in place of FBA, you charged a shipping fee of $10 to deliver or ship the order to Ron’s doorstep. Thus, the total amount that Ron paid to you for the order was $510 ($500 + $10). That is $500 for the coffee mugs and $10 for the shipping charges. Thus the total of $510 was credited to your Amazon account.

Now, Ron did not like the design of the coffee mugs. It was not what he expected it to be. So, he decided to return the order to you. When Ron returns the coffee mugs to you, you as a merchant receive the coffee mugs. In return, you have to pay back the amount paid by Ron to you for the coffee mugs as well as the amount of shipping charges that he paid to you for fulfilling the order. Thus, the total amount that you have to pay to Ron is $510 ($500 for the coffee mugs and $10 for the shipping charges).

5. Gift Wrap Credits

The Gift Wrap Credits is another FBM item, not an FBA item. This means that when you as a merchant fulfill the orders instead of Amazon and offer gift wrapping service to your customers, the amount that you charge for gift wrapping from your customers is covered under Gift Wrap Credits. Customers pay charges for gift wrapping to you as a merchant so that the order or the package is gift-wrapped nicely and delivered to the location where your customers want.

Considering the above example, as of December 31, 2023, your total Gift wrap Credits stood at $600. This is the amount that you have received from your customers in the year 2023 for Gift Wrapping their orders or packages. Since the customers pay this amount to you for offering them gift wrapping services in return, this is considered as a part of your total revenue.

Let’s take the example of Ron again and try to understand how gift wrap credits work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. Since the order was Fulfilled By Merchant (FBM) in place of FBA, you charged a shipping fee of $10 to deliver or ship the order to Ron’s doorstep. Additionally, Ron took your gift wrap service as well. The cost of gift wrap service is $5. Thus, the total amount that Ron paid to you for the order was $515 ($500 + $10 + $5). That is $500 for the coffee mugs, $10 for the shipping charges, and $5 for gift wrap service. Thus the total of $515 was credited to your Amazon account.

6. Gift Wrap Refund

The Gift Wrap Refund is related to the Gift Wrap Credits item. It represents the amount against the gift wrapping service on the customer orders that have been returned to you as a merchant due to some reason. This is the amount that you as a merchant charged customers for offering gift wrap service when they placed an order with you on Amazon and now you have to pay back or refund the customers as they returned the orders.

Since you refund the amount that the customers paid to you for the order when they placed it with you on Amazon, you also have to refund the gift wrapping fee that the customers paid to you for packaging such an order.

Considering the above example, as of December 31, 2023, your total Product Sales Non-FBA were $400,000, Product Sale Refunds Non-FBA were $500, Shipping Credits were $15000, Shipping Credit Refunds were $100, Gift wrap Credits stood at $600, and Gift Wrap Credit Refunds were $15. Thus, for the Gift wrap Credits worth $600, the gift wrap service fee that you refunded was $15.

Let’s take the example of Ron again and try to understand how shipping credit refunds work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. Since the order was Fulfilled By Merchant (FBM) in place of FBA, you charged a shipping fee of $10 to deliver or ship the order to Ron’s doorstep. Ron also took your gift-wrapping service and paid $2 for getting the coffee mugs gift-wrapped. Thus, the total amount that Ron paid to you for the order was $512 ($500 + $10 +$2). That is $500 for the coffee mugs, $10 for the shipping charges, and $2 for the gift wrapping service. Thus the total of $512 was credited to your Amazon account.

Now, Ron did not like the design of the coffee mugs. It was not what he expected it to be. So, he decided to return the order to you. When Ron returns the coffee mugs to you, you as a merchant receive the coffee mugs. In return, you have to pay back the amount paid by Ron for the coffee mugs, the amount of shipping charges that he paid to you for fulfilling the order, and the amount of the gift wrapping service that he used. Thus, the total amount that you have to pay to Ron is $512 ($500 for the coffee mugs, $10 for the shipping charges, and $2 for the gift wrapping service).

7. Promotional Rebates

Promotional Rebates represent the total amount of promotional discount that you have offered to your customers to promote the selling of your products on Amazon. For accounting purposes, Amazon showcases this amount separately in your Payout report so that you know what is the amount that you paid in the form of promotional discounts to your customers.

Considering the above example, as of December 31, 2023, your total Promotional Rebates stood at $3500. Note that this amount is a debit amount, thus showcasing the amount that has been deducted from your Amazon account on account of promotional discounts. So, to calculate the total revenue that you generated from selling your products on Amazon, the amount of promotional rebates worth $3500 will be deducted from your Product Sales Non-FBA worth $400,000.

Let’s take the example of Ron again and try to understand how promotional rebates work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. To promote your products, you offered a coupon code discount of $2. Thus, the total amount that Ron will pay to you for purchasing two coffee mugs from your Amazon store will be $502 ($500 + $2).

8. Promotional Rebate Refunds

Promotional Rebate Refunds are related to the Promotional Rebate item. It represents the amount against the promotional discounts on the customer orders that have been returned to you as a merchant due to some reason. This is the amount that you as a merchant did not charge your customers for promoting coffee mug sales on your Amazon store when they placed an order with you on Amazon and now you will receive this amount from your customers as they returned the orders.

Since you refund the amount that the customers paid to you for the order when they placed it with you on Amazon, you will also receive the rebate amount that you did not charge your customers when they purchased these products on your Amazon store.

Considering the above example, as of December 31, 2023, your total Product Sales Non-FBA were $400,000, Product Sale Refunds Non-FBA were $500, Shipping Credits were $15000, Shipping Credit Refunds were $100, Gift wrap Credits stood at $600, Gift Wrap Credit Refunds were $15, Promotional Rebates stood at $3500 and Promotional Rebate Refunds were $15. Thus, for the Promotional Rebates worth $3500, the promotional rebates that your customers refunded to you were $15.

Let’s take the example of Ron again and try to understand how promotional rebate refunds work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. Since the order was Fulfilled By Merchant (FBM) in place of FBA, you charged a shipping fee of $10 to deliver or ship the order to Ron’s doorstep. Furthermore, to promote sales, you had offered a Coupon code discount of $2. Thus, the total amount that Ron paid to you for the order was $508 ($500 + $10 – $2). That is $500 for the coffee mugs, $10 for the shipping charges, and $2 was deducted from the total purchase on account of the discount. Thus the total of $508 was credited to your Amazon account.

8. Other Items

There are some other line items under income on your Amazon Seller Payout Report. These include:

  • A-to-Z Guarantee Claims
  • Chargebacks
  • Amazon Shipping Reimbursement
  • SAFE-T Reimbursement

Now, if you are an FBA seller, that is selling products under Amazon’s FBA program, then there are certain other income items that you must know about. These include:

a. FBA Product Sales

As the name suggests, the FBA Product Sales are the sales that Amazon fulfills on behalf of the merchants rather than merchants fulfilling the orders all by themselves.

As mentioned earlier, Amazon FBA (Fulfillment by Amazon) is a service offered by Amazon that allows sellers to store their products in Amazon’s fulfillment centers. With FBA, Amazon takes care of the entire order fulfillment process, including picking, packing, shipping, and customer service.

Thus, FBA Product Sales represent the sales that Amazon fulfills on your behalf as a merchant. That means you as a merchant selling products on Amazon do not have to worry about fulfilling the orders as Amazon takes care of the entire order fulfillment process right from picking, and packing, to shipping, and customer service.

Say, for instance, as of December 31, 2023, your total FBA Product Sales were $300,000. This means that Amazon fulfilled your customer orders worth $300,000 for the year 2023.

b. FBA Product Sale Refunds

The FBA Product Sale Refunds represent the amount that stands against the customer orders that were FBA orders and now have been returned to you by your customers due to some reason. The reasons may include that the customers did not like the design of the products that they ordered or had issues with the condition in which they received the products.

Since customers returned the orders, you as a merchant get back the initially ordered products. In return, you have to pay the amount against those orders back to your customers. Since you are returning cash, it is a debit amount and is deducted from the amount of your total FBA Product Sales.

Considering the example above, as of December 31, 2023, your total FBA Product Sales were $300,000 and the FBA Product Sale Refunds were $15000. This means on the total FBA sales of $300,000, you had FBA refunds of $15000. Thus, your net FBA Sales were $285,000.

c. FBA Inventory Credit

As the name suggests, the FBA Inventory Credit is an FBA item. The FBA Inventory Credit represents the amount of products that you sent to the Amazon Fulfillment Centre but Amazon either lost those products or those products were damaged in the Amazon storage or warehouses. Since your products were damaged because of Amazon’s negligence, Amazon compensates for the harm caused to you in the form of FBA Inventory Credit.

Accordingly, Amazon will credit your Amazon account with the amount of the products that were damaged or lost in Amazon’s Fulfillment Centres due to negligence. This amount will be added to your revenues to calculate the total revenues you generated from Amazon sales.

Considering the above example, as of December 31, 2023, your total FBA Product Sales were $300,000, the FBA Product Sale Refunds were $15000, and the FBA Inventory Credit was $8,000. This means on the total FBA sales of $300,000, you had FBA refunds of $15000 and the FBA Inventory Credit was $8000. Thus, your net FBA Sales were $293,000.

d. FBA Liquidation Proceeds

Again, FBA Liquidation Proceeds is an FBA item. To understand what FBA Liquidation Proceeds stands for, let’s take the example of coffee mugs. Say, for instance, you sell coffee mugs on Amazon through its FBA program. After a while, you realize that despite making the best efforts, you are unable to sell coffee mugs.

As a result, the stock gets piled up at Amazon’s Fulfillment Centres and the storage fees you have to pay for the stock of coffee mugs stored at Amazon’s Fulfillment Stores keeps on rising. Since your coffee mugs are not being sold and your storage costs are rising, you certainly want your money back. Therefore, to deal with this, you may ask Amazon to find you a broker or act as a broker itself and find you a liquidation company that can purchase all of your coffee mugs.

Thus, the rate or price at which the liquidation company purchases all of your coffee mugs is the amount that is reflected in the FBA Liquidation Proceeds. Thus, the FBA Liquidation Proceeds represent the amount that you receive as a merchant from a Liquidation Company for purchasing the product inventory that could not be sold on Amazon for some reason.

Since the Liquidation Company credits the amount to your Amazon account, it gets added to your revenue.

Considering the above example, as of December 31, 2023, your total FBA Product Sales were $300,000, the FBA Product Sale Refunds were $15000, the FBA Inventory Credit was $8,000, and FBA Liquidation Proceeds stood at $0. This means on the total FBA sales of $300,000, you had FBA refunds of $15000, the FBA Inventory Credit was $8000, and FBA Liquidation Proceeds were $0. Thus, your net FBA Sales were $293,000.

e. FBA Liquidation Proceeds Adjustments

To understand what FBA Liquidation Proceeds Adjustments means, let’s consider the above example once again. To sell your unsold coffee mug inventory, you asked Amazon to hire a Liquidation Company that can purchase your coffee mugs. Note that the rate at which the Liquidation Company purchases your coffee mugs is quite lower than the actual price of your coffee mugs.

Now, before Amazon could send the unsold coffee mug inventory to the warehouse of the liquidation company, there were some customers who purchased a few of the coffee mugs on your Amazon store. Since Amazon credits your account with the FBA Liquidation Proceeds for the unsold inventory being sold to a Liquidation Company, after FBA sales on Amazon store, Amazon would now deduct the amount of such sales from your Amazon account. That’s because Amazon credited your account already with the amount of these sales as FBA Liquidation Proceeds.

Let’s consider an example to understand this. Say, you had an unsold inventory of 100 mugs worth $50 each. You ask Amazon to hire a Liquidation Company to sell these unsold coffee mugs. Amazon hires a Liquidation Company that agrees to buy your coffee mugs at $10 each. Thus, the Liquidation Company would pay a total of $ 1000 ($10 x 100) to Amazon for purchasing the unsold coffee mugs. Amazon would immediately credit your account with an amount of $1000 as FBA Liquidation proceeds.

Now, before Amazon could deliver the unsold inventory of 100 coffee mugs to the warehouse of the Liquidation Company, a few customers on your Amazon store purchased 20 coffee mugs. Since Amazon credited your account with $1000 as FBA Liquidation proceeds for 100 mugs, it will now have to debit your account with $200 ($10 x 20) for the 20 coffee mugs that have been sold to customers through Amazon store rather than been sold through the Liquidation Company.

Thus, all the above items help you to calculate the total revenue that you generate by selling on Amazon.

Also Read: How To Do Bookkeeping & Accounting For Amazon FBA Businesses: The Ultimate Guide

II. Cost Of Goods Sold

The cost of goods sold represents the costs that are directly incurred to produce or purchase goods or render services to be sold to the ultimate consumers.

The Cost of Goods Sold in the Amazon Seller Income Statement represents the cost directly associated with manufacturing products that you sell on the Amazon store. Such costs may include the cost of materials and contract labor, packaging, etc. In case you purchased the products from a trader or a wholesaler, the Cost of Goods Sold can also represent the cost of the goods that you purchased for reselling in the Amazon market.

Note that the cost of sales is typically a variable cost. This means that such a cost fluctuates with the changes in the sales volume. Accordingly, an increase in sales would lead to an increased cost of sales. Likewise, a decrease in sales leads to a decreased cost of sales.

Typically, COGS include the sum of the amount of opening stock, the purchases that you made during the year, the amount of direct expenses you incurred to purchase or manufacture the products less the amount of closing stock.

COGS = Opening Stock + Purchases + Direct Expenses – Closing Stock

Let’s consider the example of coffee mugs to understand how COGS is showcased in your Amazon seller Profit and Loss statement.

Say, you had the following items when preparing your Amazon Seller Profit and Loss Statement for the year ended December 31, 2023.

  • Opening Stock $15,000 ($50 x 300)
  • Raw Material $1000
  • Labor $500
  • Packaging $100
  • Shipping $200
  • Closing Stock $30,000 ($60 x 500)
  • Purchases $25000

Thus, the COGS for the year ended December 31, 2023 will be:

COGS = Opening Stock + Purchases + Direct Expenses – Closing Stock
= $15,000 + $25,000 + $1800 – $30,000
= $11,800

Direct Expenses = Raw Material + Labor + Packaging + Shipping
= $1,000 + $500 + $100 + $200
= $1800

Referring to the Amazon Seller Profit and Loss Statement template above, you must showcase costs related to raw material, labor, and overheads in the respective heads. Say, if your raw material cost for manufacturing products to be sold on Amazon for the year ended December 31, 2023, is $20,000, it must be showcased against the head ‘Raw Material’ under Cost of Goods Sold in your Amazon Seller Profit and Loss Statement. The same process should be repeated for Labor and Overhead costs.

Also Read: What Is Cost Of Goods Sold – COGS?

III. Operating Expenses

The Operating Expenses in the Amazon Seller Income Statement refer to the costs that you as an Amazon merchant incur to run your business of selling products on your Amazon store. Such expenses may include warehouse rent (in case of FBM), PPC advertising, internet, Seller Fulfilled Selling Fees, FBA Selling Fees, FBA Transaction Fees, Other Transaction Fee, Service Fees, Shipping Label purchases, etc.

Unlike the cost of sales, the operating expenses of an Amazon seller are not the ones that can be directly linked to the production of goods or the rendering of the services being sold. Rather, they are the costs that you as an Amazon seller incur to run your day-to-day business of selling products on Amazon.

Let’s consider the Non-FBA seller example once again to understand what are the various operating expenses that you may incur as an Amazon seller.

Expenses Amount Income Amount
Seller Fulfilled Selling Fees $4200 Product Sales Non-FBA $400,000
Selling Fee Refunds ($2000) Product Sale Refunds Non-FBA ($300)
Other Transaction Fees $0 Shipping Credits $15000
Other Transaction Fee Refunds $0 Shipping Credit Refunds ($350)
Shipping Label Purchases $10,000 Gift Wrap Credits $600
Carrier Shipping Label Adjustments ($250) Gift Wrap Credit Refunds ($15)
Service Fees $2500 Promotional Rebates ($3500)
Refund Administration Fees

Adjustments

$400 Promotional Rebate Refunds $100
Cost of Advertising $500 A-to-Z Guarantee Claims $0
Refund for Advertiser $1000 Chargebacks $0
Liquidations Brokerage Fee $0 Amazon Shipping Reimbursement $0
SAFE-T Reimbursement $0

1. Seller Fulfilled Selling Fees

As the name suggests, the Seller Fulfilled Selling Fees refers to the referral fee that you pay to Amazon out of the total sale that you make in a particular order under FBM and not FBA. It is the fee that you pay to Amazon for referring customers to you, provided you fulfill orders on your own as a merchant over-selling them under the Amazon FBA program.

In simple words, Seller Fulfilled Selling Fees are the fees that you as a merchant, fulfilling orders by himself or herself, pay to Amazon for using its platform to sell products to customers.

However, when you sell products as a part of Amazon’s FBA program, you pay FBA Selling Fees instead of the Seller Fulfilled Selling Fees to Amazon.

Considering the above example, as of December 31, 2023, your Seller Fulfilled Selling Fees stood at $4200. This is the amount that you pay to Amazon as a merchant fulfilling orders all by himself or herself for referring a customer on the amount of each sale that you make. Typically, the Seller Fulfilled Selling Fees is 15%.

Let’s take the example of Ron again and try to understand how Seller Fulfilled Selling Fees work on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. It was a Fulfilled By Merchant (FBM) order which means that you as a merchant had taken care of the fulfillment process. Since this customer purchases your products on Amazon, you as an Amazon merchant are required to pay a referral fee of 15% on every sale that you make on Amazon. Thus, the Seller Fulfilled Selling Fees that you will pay to Amazon will be $75 (15% x $500).

Also Read: Amazon FBA Fees in 2023: All An Amazon Seller Needs To Know

2. Selling Fee Refunds

The Selling Fee Refunds refer to the amount of the Seller Fulfilled Selling Fees as well as the FBA Selling Fees on the return customer orders that you receive as a merchant from Amazon. This is the amount that you as a merchant paid to Amazon out of the total sale that you made initially in a particular order under FBM and not FBA. But now you will receive this amount back from Amazon as the customer who placed the order has returned the order back to you.

However, there’s a caveat here. As Amazon manages the entire refund process, it charges a refund administration fee of 20% to administer the refund process. Thus, when you as an Amazon seller receive the Selling Fees Refund, it is given after deducting a Refund Administration Fee of 20%.

Considering the above example, as of December 31, 2023, your Seller Fulfilled Selling Fees stood at $4200 and your Selling Fees Refund stood at $2000. This means that you paid the Seller Fulfilled Selling Fee worth $4200 to Amazon and the amount of the Selling Fees that you received as a refund from Amazon on return orders fulfilled by you as a merchant in the year 2023 was $2000.

3. Other Transaction Fees

As the name suggests, the Other Transaction Fees refers to the fee that Amazon charges on transactions that you made as a seller on Amazon apart from FBM or FBA Sales. Now, to explain what comes under Other Transaction Fees, let us cover two types of transactions.

The first transaction may include the sale of any media items. Say, for instance, you sell DVDs or books on your Amazon account. As a rule, you have to pay a closing fee or a transaction fee of $1.80 to Amazon for selling any of the media items.

The second transaction may be the one related to the type of account you have on Amazon as a seller. If you have an individual seller account in place of a Professional Seller account, you have to pay a transaction fee of $0.99 on every sale that you make on Amazon as an individual seller.

Considering the above example, as of December 31, 2023, your Other Transaction Fees stood at $0.

4. Other Transaction Fee Refunds

This is the opposite of Other Transaction Fees. This is the amount of the Other Transaction Fees on the return customer orders that you receive as a refund from Amazon. This is the amount that you as a merchant paid to Amazon out of the total sale that you made initially in a particular order on transactions other than FBM or FBA. But now you will receive this amount back from Amazon as the customer who placed the order in such a transaction has returned the order back to you.

However, there’s a caveat here. As Amazon manages the entire refund process, it charges a refund administration fee of 20% to administer the refund process. Thus, when you as an Amazon seller receive the Other Transaction Fees Refund, it is given after deducting a Refund Administration Fee of 20%.

Considering the above example, as of December 31, 2023, your Other Transaction Fees stood at $0 and your Other Transaction Fee Refunds stood at $0. This means that you paid an Other Transaction Fee worth $0 and the amount of the Other Transaction Fee Refunds that you received as a merchant from Amazon in the year 2023 was $0.

5. Shipping Label Purchases

This is an FBM item. When you as a merchant fulfill the orders all by yourself, Amazon gives you an option to buy shipping from Amazon. This means that you can pay Amazon to work with the freight-for-order to ship the order for you. Thus, when you order a Shipping Label, you pay Amazon for it.

Considering the above example, as of December 31, 2023, your Shipping Label purchases stood at $10,000. This means that you paid Amazon for Shipping labels worth $10,000 in the year 2023.

6. Carrier Shipping Label Adjustments

This is an FBM item, not an FBA item. As the name suggests, the Carrier Shipping Label Adjustments covers all the adjustments that can be made to the Shipping Label purchases that you made as a merchant from Amazon. Now, let’s understand what type of adjustments can be made here.

Say, for instance, you purchased a shipping label from Amazon for an order to be delivered to a particular customer. What this means is that you purchased the shipping service of Amazon for a specific order. Now, Amazon would work with a Freight-For-Order to deliver the order to your customer.

On the shipping label that you purchased from Amazon, you mentioned that the order weighed 9 pounds. However, when the Freight-For-Order delivers the order to your customer, it realizes that the order weighs more than 9 pounds, say 10 pounds. Thus, the Freight-For-Order discerns that Amazon paid less for shipping the order relative to what it was required to pay to the Freight-For-Order. Therefore, the Freight-For-Order charges the remaining shipping charges from Amazon. Amazon, in return, debits your account with the amount as a shipping fee that you are required to pay to Amazon for the extra 1 pound that you did not mention on the Shipping Label.

The other type of shipping label adjustment can be the reverse of the above entry. Say, the package that you want to deliver to your customer by purchasing Amazon’s shipping is 10 pounds. However, by mistake, you mentioned its weight to be 12 pounds on the shipping label that you purchased from Amazon. This means that you overpaid the shipping to Amazon who further passed it on to the Freight-For-Order.

However, the Freight-For-Order discerns that Amazon paid more for shipping the order relative to what it was required to pay to the Freight-For-Order. Therefore, the Freight-For-Order refunds the extra shipping charges that it received from Amazon. Amazon, in return, credits your account with the amount as a shipping fee that you overpaid to Amazon for the extra 2 pounds that you mentioned by mistake on the Shipping Label.

All these adjustments will become a part of the Carrier Shipping Label Adjustments.

7. Service Fees

The Service Fees refers to the ongoing amount that Amazon charges from you as a merchant. Typically, it covers the subscription fee that you pay to Amazon for holding a professional seller account instead of an individual seller account with Amazon.

8. Refund Administration Fees

We have covered this before in the Selling Fees Refund and Other Transaction Fees Refund. When customers return orders, you as a merchant receive products from such customers, and in return you pay them back the amount charged for such an order. Apart from this, you also receive the referral fee (FBA Transaction Fees, Seller Fulfilled Selling Fees, or Other Transaction Fees) from Amazon that you paid Amazon for referring a customer for your products.

However, there’s a caveat here. As Amazon manages the entire refund process, it charges a refund administration fee of 20% to administer the refund process. Thus, when you as an Amazon seller receive the referral fee refund (FBA Transaction Fees, Seller Fulfilled Selling Fees, or Other Transaction Fees) from Amazon, it is given after deducting a Refund Administration Fee of 20%. This amount is covered under Refund Administration Fees and is an expense for you as a merchant.

Considering the above example, as of December 31, 2023, your Refund Administration fee adjustments stood at $400.

9. Adjustments

This line item covers any adjustments that Amazon has to make to close the books of accounts for a given pay period.

10. Cost Of Advertising

The Cost of Advertising is nothing but the Pay-Per-Click cost that you pay Amazon for selling your products. So whenever customers click on your promoted product on Amazon, you pay Amazon some cost for every click that the customers make. Thus, it’s a promotion cost that you pay Amazon for advertising your products before the target audience, and it’s an operating expense for you as a merchant.

Considering the above example, as of December 31, 2023, your Cost of Advertising stands at $500.

11. Refund For Advertiser

The Refund For Advertiser represents the amount that Amazon refunds to you against PPC advertising if your budget for the advertisements gets exceeded due to some unwanted reasons.

Say, for instance, one of your competitors launches new coffee mugs and to promote their products on Amazon, they also post advertisements.

To demotivate you as a seller from selling your products, they start clicking on your advertisements. This is a click fraud. Such an act exhausts your advertisement budget overnight. Hence, to compensate for the loss, Amazon credits this amount back to your account.

12. Liquidations Brokerage Fee

The Liquidation Brokerage Fee refers to the amount of fee that Amazon charges you for brokering a deal with a liquidation company to purchase your unsold inventory at a price lower than the actual price of your products. Since Amazon takes the pain of finding a liquidation company and brokering a deal with it to purchase your unsold inventory, it charges a brokerage fee for such a deal.

This is an operating expense for you as an Amazon seller and thus it is showcased as a debit balance in your Amazon Seller Payout Report.

Now, if you are an FBA seller, that is selling products under Amazon’s FBA program, then there are certain other expense items that you must know about. These include:

1. FBA Selling Fees

As the name suggests, the FBA Selling Fees refers to the referral fee that you pay to Amazon out of the total sale that you make in a particular order under FBA. It is the fee that you pay Amazon for referring customers to you, provided Amazon fulfills orders.

In simple words, FBA Selling Fees are the fees that you as a merchant fulfilling orders under FBA, pay to Amazon for using its platform to sell products to customers.

Considering the above example, as of December 31, 2023, your FBA Selling Fees stood at $20,000. This is the amount that you pay to Amazon as a merchant fulfilling orders under FBA for referring a customer on the amount of each sale that you make. Typically, the FBA Selling Fee is 15%.

Let’s take the example of Ron again and try to understand how Seller Fulfilled Selling Fees works on a particular transaction. Say, Ron purchased two coffee mugs from you on Amazon worth $500. It was a Fulfilled By Amazon (FBA) order which means Amazon takes care of the fulfillment process. Since this customer purchases your products on Amazon, you as an Amazon merchant are required to pay a referral fee of 15% on every sale that you make on Amazon. Thus, the FBA Selling Fees that you will pay to Amazon will be $75 (15% x $500).

2. FBA Transaction Fees

FBA Transaction Fees have no relation with the FBA Selling Fees. FBA Selling Fees is the referral fee that Amazon charges for referring customers to Amazon sellers.

However, FBA Transaction Fees refer to the fee that Amazon charges to package your products, deliver them to your customers, and take care of customer service. This is in no way related to fees that Amazon charges for referring customers to you. However, it’s related to the size and weight of the order.

3. FBA Transaction Fee Refunds

The FBA Transaction Fee Refunds are the opposite of the FBA Transaction Fees. Amazon refunds you as a merchant the FBA Transaction Fees when it makes a mistake while shipping your products to the customers. Amazon may ship products in a pilfered or damaged condition due to which customers return such orders to Amazon. Since Amazon makes a mistake in delivering products to customers due to which the orders get returned, Amazon refunds the FBA Transaction Fee that it charged earlier for shipping the products to customers and handling customer service. Such a refund is showcased under the head FBA Transaction Fee Refunds.

4. FBA Inventory And Inbound Services Fees

This is the cost that you pay to Amazon for getting your products stored at their Fulfillment Centres. If you manage your inventory well, bearing this cost would not be a challenge for you.

In addition to this cost, FBA Inventory and Inbound Services Fees also include the charges you pay to Amazon for affixing the FNSKU labels onto your packages instead of getting those labels printed yourself.

Apart from these costs, anything that you pay to Amazon for managing your inventory is covered under the head FBA Inventory And Inbound Services Fees.

IV. Finance Costs

Another type of expense that you incur to run your business as an Amazon Seller is the finance cost. These costs include the interest expense. The interest expense refers to an expense that you incur for utilizing the funds that you borrowed as an Amazon Seller for a fixed period. You may borrow funds for purchasing inventory, raw materials, purchasing equipment or vehicles, etc.

The Finance Costs act as tax shields for your business. These are tax-deductible expenses which means that the profit is calculated after taking into account the Finance Costs. As a result, the finance costs reduce your profits for a given period, however, these result in tax savings for you as an Amazon Seller.

When preparing Amazon Seller Profit and Loss Statement, you have to take into account Finance Costs for calculating the profits earned from the sale of products on Amazon.

V. Taxes

When preparing the Amazon Seller Profit and Loss Statement, you also have to take into account the income tax you pay to the federal government for a given tax period. Note that these taxes do not cover the sales tax that you may have collected from customers on the sales made.

Sales Tax collected from customers on the sale of products is a liability and is showcased on the credit side of the balance. It’s a liability because when you generate revenues by selling products to customers, you collect sales tax on such sales and must remit the same to the state tax authority where you have an economic nexus. Till the time you remit the sales tax collected to the requisite state government, it appears as a liability on your balance sheet. Once you pay the tax to the state government, your tax liability as well as the cash on your balance sheet is reduced by the same amount.

VI. Net Profit After Taxes

The Net Profit in the Amazon Seller Profit and Loss Statement represents the difference between total revenues or incomes earned and total expenses incurred by you as an Amazon Seller during an accounting period.

It tells you about how much income you have earned or lost during the accounting period. Note that the gross profit determines how profitable you are as a merchant in selling products on Amazon. Whereas, the operating profit demonstrates how efficient you are in controlling both production and operating costs as an Amazon seller.

Conclusion

Calculating profit and loss on your Amazon Seller Account involves understanding your revenue, costs, and fees associated with selling on the platform. Remember that the income statement represented in this article provides a general overview of your financial performance on Amazon. Regularly tracking and analyzing these metrics will help you make informed business decisions and optimize your operations for better profitability. Using accounting software or tools designed for e-commerce sellers can streamline this process and provide more detailed insights into your financial performance.

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