How do I account for Amazon advertising costs in my books?
Amazon advertising costs should be recorded as a marketing or advertising expense, separate from your cost of goods and Amazon seller fees. The accounting treatment is simple. The challenge is extracting clean data from Amazon’s consolidated reporting.
Amazon deducts advertising costs from your settlements before depositing funds to your bank account. The net deposit you see is already reduced by ad spend, referral fees, FBA charges, and everything else Amazon takes out. If you just record the bank deposit as revenue, you’re understating both your sales and your advertising expenses. Your books will balance but they won’t tell you anything useful about how much you’re actually spending to acquire customers.
Pull your advertising reports directly from Amazon’s advertising console rather than relying solely on settlement reports. The console gives you detailed breakdowns by campaign, ad type, and time period. This granularity helps you understand what’s working and where you’re wasting money. Settlement reports lump everything together in a way that makes analysis nearly impossible.
In your chart of accounts, create an advertising or marketing expense account specifically for Amazon ads. Don’t combine this with Amazon’s selling fees or referral commissions. Ad spend is a discretionary cost you control. Referral fees and FBA charges are direct costs of selling on the platform. Keeping them separate lets you see true product margin versus marketing investment at a glance.
If you’re running significant e-commerce volume through Amazon, consider integration tools like A2X or Link My Books. These connect to your Amazon account and automatically break out advertising costs, fees, refunds, and net revenue into your accounting software. The time savings add up quickly and the data is more reliable than manual extraction from multiple Amazon reports.
Track your advertising as a percentage of revenue each month. If you’re spending 30% of revenue on advertising but your product margins are 25%, you’re losing money on every advertised sale. Good small business bookkeeping makes this obvious before it becomes a serious problem. The goal isn’t just recording the expense correctly. It’s having numbers that actually help you make better decisions about where to put your ad dollars.
Full-Service Bookkeeping for Greater Phoenix
The Next Step:
A Quick Conversation
Tell us about your situation. We'll listen, ask a few questions, and give you a clear price to handle the work.
More Questions
What bookkeeping tasks should be done weekly vs monthly?
Weekly tasks focus on keeping transactions current and catching issues early. Monthly tasks involve full reconciliations, financial statement review, and closing out the period properly.
Read answerWhat records should a landscaping business keep?
Landscaping businesses need to track income documentation, expense receipts, vehicle mileage, equipment records, and employee files. The key is capturing everything as it happens rather than trying to reconstruct records later.
Read answerHow do I handle progress billing for construction projects?
Define billing milestones in your contract, create a schedule of values, and invoice consistently at each project phase. Track retainage separately and record each billing against the specific job in your accounting system.
Read answerDo Arizona businesses have special bookkeeping requirements?
Arizona's Transaction Privilege Tax creates unique bookkeeping needs because rates vary by city. Tracking TPT by jurisdiction and filing on the correct schedule are the main Arizona-specific requirements.
Read answerHow often should my books be updated?
Monthly is the minimum for most small businesses. Businesses with high transaction volume or cash-intensive operations benefit from weekly updates. The right frequency depends on how quickly you need financial information to make decisions.
Read answerHow do I reconcile Amazon payouts with my bank account?
Amazon deposits a net payout that includes sales minus fees, refunds, and reserves. Use your Settlement Report from Seller Central to see what's inside each deposit and record the components separately in your books.
Read answer