The most common reason e-commerce profit and loss statements are wrong is Cost of Goods Sold. If COGS isn’t accurate, your gross profit is fiction, and you can’t make good decisions about pricing, marketing spend, or which products are actually making money.

COGS goes wrong when you’re not tracking actual product costs. That means purchase price plus landed costs like freight, customs duties, inspection fees, and everything it takes to get inventory ready to sell. Many e-commerce businesses only capture the supplier invoice and miss hundreds or thousands in additional costs that should be included. Your books show higher profit than reality because you’re understating what the product actually cost you.

Inventory counts matter too. If your books say you have 500 units but you actually have 450, your COGS is understated and your profit is overstated. Shrinkage, damage, and miscounts all create gaps between what your accounting software thinks you have and what’s actually sitting in your warehouse or FBA. Without regular reconciliation, these errors compound over time.

Amazon, Shopify, and other platforms charge a maze of fees. Referral fees, fulfillment fees, storage fees, payment processing fees. If these aren’t categorized consistently, your expenses are scattered across random accounts and you can’t see what you’re actually paying to sell on each channel. The total might be right, but the breakdown is useless for analysis.

Returns mess up P&Ls when they’re not recorded correctly. A refund should reduce revenue, and if the item goes back into sellable inventory, you need to reverse the COGS entry too. Miss either piece and your numbers drift. High-return categories like apparel can see significant distortion if returns aren’t handled properly.

Cash basis accounting can also distort e-commerce P&Ls. You might receive payment from Amazon weeks after the sale, or pay for inventory months before you sell it. If you’re recording based on cash movement rather than when transactions actually happen, your monthly P&L won’t match what your business actually did that month.

Fixing an inaccurate P&L starts with understanding where it’s breaking down. Look at gross margin first. If it doesn’t match what you expect based on your pricing and costs, COGS is the problem. Then check that marketplace fees are landing in consistent expense categories. Finally, make sure returns are hitting both revenue and inventory appropriately. Our Phoenix area bookkeeping services often start with diagnosing exactly these issues before building a system that keeps numbers accurate going forward.