How to Record Amazon Fees, Refunds and Reserves

Last verified: June 2026

Amazon doesn't send you a clean invoice at the end of the month. It sends a settlement — a dense flat file that bundles product revenue, referral fees, FBA fulfilment fees, reimbursements, refund chargebacks, reserve holds, and about a dozen other transaction types, then nets them all into a single bank deposit. Post that deposit as "Amazon income" and move on, and your P&L is wrong, your gross margin is wrong, and your accountant will have a miserable time come year-end. This guide explains exactly how to record Amazon seller fees, handle refunds, and account for reserves — with worked examples and a chart of accounts structure you can implement today.

Why accurate recording of Amazon fees matters for your P&L

Here's the thing: Amazon fees can consume 30–40% of gross revenue on many product categories. If they're not broken out, you can't see whether your Amazon channel is actually profitable. A brand doing £500,000 in Amazon GMV might be netting as little as £280,000 after referral fees, FBA fees, and subscription costs — yet if everything's lumped into one "Amazon sales" line, the P&L looks far healthier than it is.

There's also the tax dimension. In the UK, HMRC expects your accounts to reflect the economic reality of your business. If you're a VAT-registered seller, the gross sale amount is the basis for VAT reporting — not the net payout Amazon deposits. Booking the payout as if it were revenue understates your turnover and can create VAT discrepancies. The same logic applies in the US, where sales tax nexus rules (which we've covered in our guide to US sales tax nexus) require you to report gross sales in marketplace facilitator states regardless of what lands in your bank account.

And honestly, the business intelligence argument is just as compelling as the compliance one. When you separate fee types into distinct GL accounts, you can actually answer questions like: did FBA costs increase as a percentage of revenue last quarter? Are referral fees eating more margin on the new product line than the old one? You can't answer either with a single "Amazon income" line.

Most operations managers we talk to already know this is a problem. They just haven't had time to fix it. The goal of this guide is to make the fix straightforward enough that you can actually get it done.

Accurate fee recording gives you a defensible P&L, correct VAT or sales tax reporting, and channel-level profitability data — none of which are possible if you're posting the net payout as a single revenue figure.

Understanding Amazon seller fee types and their accounting treatment

Amazon charges sellers several distinct fee types, and each has a different accounting treatment depending on whether it's a variable cost of sale, a fixed overhead, or a fulfilment cost. Getting the classification right is the foundation of everything else.

Referral fees

Referral fees are Amazon's commission on every sale — typically 8–15% of the sale price depending on category. These are direct costs of sale and belong on your P&L immediately below gross revenue, in a "cost of sales" or "selling fees" sub-account. They vary directly with revenue, so treating them as overhead distorts your gross margin calculation. Sold a £50 product and paid a £7.50 referral fee (15%)? Your gross revenue is £50, and that £7.50 sits as a line in cost of sales — not in operating expenses.

For a brand selling £40,000/month on Amazon at an average 13% referral fee, that's £5,200/month in referral fees that needs to hit cost of sales, not overheads. Miss that distinction and your gross margin looks 13 percentage points better than it actually is.

FBA fulfilment fees

Fulfilment by Amazon (FBA) fees cover pick, pack, and ship. They're also a direct cost of sale — the fee you pay to get the product to the customer. Book them in a separate sub-account within cost of sales: something like 4200 — FBA Fulfilment Fees. Don't bundle them with referral fees; keeping them separate lets you model what happens to margins if you switch from FBA to a third-party logistics provider or your own warehouse.

FBA storage fees are slightly different. Monthly storage fees are a holding cost — closer to warehousing overhead than a direct cost of sale — so many accountants prefer to book them under operating expenses rather than cost of sales. Long-term storage fees (charged on inventory held for more than 365 days as of the fee schedule in effect in 2026) are even more clearly an overhead. Pick a treatment, be consistent, and stick to it. We covered the inventory management side of this in our piece on Shopify and Amazon inventory sync, because FBA storage fees are usually the first sign that your replenishment process needs attention.

Subscription and service fees

The Professional selling plan fee is a fixed monthly overhead — book it to a Sales Platform Subscriptions account under operating expenses, not cost of sales. It doesn't vary with revenue, so it shouldn't sit in your gross margin calculation.

Amazon Ads spend is another category entirely. It's marketing expenditure and belongs in its own Amazon Advertising account under marketing or selling expenses. Lumping it with FBA fees makes it impossible to track your advertising cost of sale (ACoS) or return on ad spend (ROAS) at the P&L level — which defeats the purpose of running ads at all.

Other fee types

The settlement file also contains account fees, selling plan fees, FBA inventory service fees, removal order fees, return processing fees, and occasionally miscellaneous transaction adjustments. The principle is the same throughout: if the fee is directly triggered by a sale, it's a cost of sale. If it's a fixed or administrative cost, it's an operating expense. When in doubt, ask yourself whether the fee would exist if you made zero sales that month. Subscription fees — yes. FBA fulfilment fees — no.

Here's a reference table for how to classify the main Amazon fee types:

Amazon seller fees span at least three P&L categories — cost of sales, operating expenses, and marketing — and mixing them up in a single account produces a gross margin figure that's useless for decision-making.

Recording refunds and customer returns in your books

Amazon refunds must be recorded as reductions to revenue — a contra-revenue entry — not as expenses. This is the most commonly mishandled transaction type we see in e-commerce bookkeeping, and getting it wrong inflates your gross margin while simultaneously understating your net profitability.

Why contra-revenue, not expense?

When a customer returns a product and Amazon refunds them, the original sale is being partially or fully unwound. The revenue you recognised at the time of sale is now being clawed back. That's not a new cost — it's a reduction of a previously recorded revenue figure. Posting it to an expense account makes your gross revenue look too high (you're showing sales that didn't stick) and inflates gross margin as a percentage.

The correct double-entry is:

• Debit: Sales Returns & Allowances (a contra-revenue account, e.g. 3900 — Amazon Returns)
• Credit: Accounts Receivable or the settlement clearing account

Your P&L then shows gross revenue, less returns, equals net revenue — which is the figure you should be working with for all margin calculations.

COGS on returned items

Here's where it gets more nuanced. If the returned item is resellable, you need to reverse the cost of goods sold entry from when the item originally sold, and put the inventory back on the balance sheet. If it's not resellable (damaged, or already disposed of under Amazon's FBA policies), the COGS stays on the P&L as a write-off — that's a genuine cost.

Worked example: you sold 10 units of a product in May at £45 each (£450 gross revenue). Your landed COGS per unit is £14. Three were returned in June, all deemed resellable. The accounting entries for the returns are: debit Sales Returns £135 (3 × £45), credit settlement clearing account £135; debit FBA Inventory £42 (3 × £14), credit Cost of Goods Sold £42. Net effect: your June books show net revenue reduced by £135 and inventory restored by £42. That's the economic reality — those sales didn't happen.

Refund adjustments in the settlement file

Amazon's settlement file shows refunds as negative amounts under "ItemPrice" adjustments, and separate positive entries for the refund commission (Amazon gives back part of the referral fee when a refund occurs). Don't net these manually — post each component to its correct GL account. The refund reversal goes to your contra-revenue account; the returned referral fee goes to reduce your referral fee cost-of-sales account. They're not the same account, and offsetting them produces a net figure that hides what actually happened.

If you're spending an hour per settlement period unpicking these manually, that's a genuine operational inefficiency — and one of the clearest signs you'd benefit from automating reconciling your Amazon settlements to your ledger.

And frankly, most sellers underestimate their actual return rate because they're only looking at units, not the revenue impact. When you post returns correctly to a contra-revenue account, the real return rate by revenue — often higher than the unit rate, because high-value items get returned more — becomes visible in your P&L.

Amazon refunds are contra-revenue entries, not expenses. Recording them incorrectly inflates gross revenue and gross margin, and obscures the true return rate by product.

Tracking and recording Amazon reserve funds

An Amazon reserve is money Amazon withholds from your settlement payout as a security buffer. It's your money, not Amazon's, and it must never be recorded as an expense or a loss. Misclassifying reserves is one of the most damaging bookkeeping errors we see from growing Amazon sellers.

What are reserves?

Amazon holds reserves to cover potential liabilities: pending refunds, A-to-Z guarantee claims, chargeback risk, or account health flags. The reserve amount varies based on your performance metrics, disbursement history, and the volume of open orders. A newer account doing £80,000/month in sales might have £15,000–£20,000 held at any given time — a material balance sheet item by any measure.

When we were running our own brands on Amazon, the first time a reserve appeared on our statement we assumed something had gone wrong. It hadn't. It was Amazon's standard practice, and the money was released in the next settlement cycle. The mistake would have been writing it off as a loss.

How to record a reserve

Reserves sit on your balance sheet, not your P&L. The correct treatment:

• When Amazon withholds the reserve: Debit 1610 — Amazon Reserve (Current Asset); Credit 2610 — Amazon Reserve Liability. The asset represents the cash you're owed; the liability represents Amazon's obligation to release it.
• When the reserve is released: Debit 2610 — Amazon Reserve Liability; Credit 1610 — Amazon Reserve (Current Asset). The two entries cancel out and the cash flows into your bank via the settlement payout.

Some accountants prefer a simpler one-account approach: a current asset called Amazon Funds in Reserve that increases when funds are withheld and decreases when they're released. Either approach works as long as the balance is visible on your balance sheet and never touches P&L.

Reserve holds and account health

Reserve hold amounts and durations aren't fixed — they scale with account performance. An account with a high order defect rate, a suspension history, or a spike in A-to-Z claims will see larger and longer-lasting reserves. For audit and cash flow planning purposes, document the reason for each reserve in your accounting notes: the date it was flagged in Seller Central, the stated reason (if Amazon provides one), and the expected release window. This documentation matters if you're ever audited — and it also forces you to monitor account health as a financial discipline, not just an operational one.

If you're managing inventory across Amazon and other channels simultaneously, reserve-driven cash flow gaps can genuinely strain replenishment — particularly if your multi-channel inventory management is triggering purchase orders based on demand forecasts that assume full cash availability. Worth flagging to your operations team.

Amazon reserves are current assets on your balance sheet — funds withheld temporarily, not losses. Recording them to P&L is a bookkeeping error that understates your net assets and overstates your costs.

Best practices for monthly reconciliation and chart of accounts setup

Monthly reconciliation against Amazon Seller Central reports is the practice that catches everything else — fee mismatches, missing refund reversals, unreleased reserves, and posting errors that quietly accumulate into a year-end nightmare if nobody looks.

Chart of accounts: the foundation

Before you can reconcile, you need a chart of accounts structured for e-commerce. The key principle is channel separation: Amazon fees should never share an account with Shopify fees, eBay fees, or any other platform. Use sub-accounts or tracking categories (Xero calls them "tracking categories"; QuickBooks calls them "classes") to split by channel from day one. This is far easier to set up now than to retrofit later when you're trying to explain a blended P&L to a potential acquirer or investor.

Recommended Amazon-specific accounts (illustrative numbering — adjust to your existing chart):

• 3000 — Amazon Gross Sales: gross GMV before any deductions
• 3900 — Amazon Sales Returns: contra-revenue for refunds
• 4100 — Amazon Referral Fees: cost of sales
• 4200 — FBA Fulfilment Fees: cost of sales
• 4300 — Amazon Return Processing Fees: cost of sales
• 5000 — Amazon COGS: landed cost of goods sold on Amazon channel
• 6100 — Amazon Platform Subscription: operating expense
• 6300–6320 — FBA Storage & Removal: operating expense
• 7100 — Amazon Advertising: marketing expense
• 1610 — Amazon Reserve (Current Asset): balance sheet

If you're also running Shopify, mirror this structure: 3100 for Shopify Gross Sales, 4110 for Shopify Transaction Fees, and so on. We've published a parallel breakdown in our Shopify accounting and bookkeeping guide — the structure translates directly.

The monthly reconciliation workflow

Run this process once per settlement period (Amazon settles every 14 days for most accounts) and then do a monthly close-off check:

1. Download the settlement report from Seller Central (Reports > Payments > All Statements). The flat file contains every transaction type for the period.
2. Reconcile gross sales against your order reports. Total order revenue in the settlement should match your Manage Orders data for the same period, adjusted for pending orders.
3. Verify fee totals by category. Pull the "Transaction View" in the settlement and sum by transaction type. Compare against what you've posted to each GL account.
4. Check refund entries. Every refund in the settlement should have a matching contra-revenue entry and, where applicable, a COGS reversal for resellable returns.
5. Reconcile the reserve movement. The settlement shows your opening reserve balance, movements during the period, and closing reserve. Your balance sheet reserve asset should match the closing balance exactly.
6. Confirm the bank deposit. The net settlement amount (gross sales minus all fees minus refunds plus any reimbursements, minus reserve movements) should match the actual bank deposit to the penny. If it doesn't, the discrepancy is in one of the line items above.

If you want to see how this data flows into a reporting tool, our guide to connecting Amazon Seller Central to Looker Studio covers the reporting layer on top of this foundation.

Common reconciliation errors to watch for

A few patterns come up repeatedly. Watch for Amazon reimbursements — these appear in the settlement when Amazon compensates you for lost or damaged FBA inventory. They're not revenue; they're reimbursements of inventory cost. Book them as a credit to your COGS or inventory account, not as sales. Misclassifying them as revenue overstates your turnover.

Watch also for settlement adjustments and "other transaction" line items. These can include anything from account-level fee credits to miscellaneous chargebacks. Don't post them to a catch-all "Miscellaneous" account — investigate each one, identify the category, and post to the correct account. One brand we know had £4,200 sitting in a Miscellaneous Amazon account for eight months, which turned out to be a mixture of promotional fee credits and a duplicate FBA fee charge. The duplicate was recoverable — but only because someone finally looked.

And use sub-accounts, not tracking codes, for your fee categories where possible. Tracking codes are useful for channel-level P&L, but they're not a substitute for proper GL structure. Your auditor needs to see the accounts, not just the tags.

Connecting to inventory management

Accurate fee recording is inseparable from accurate inventory data. Your COGS entries are only correct if your landed cost per unit is correct — and landed cost depends on having purchase orders, freight, and duties recorded in your inventory system. If your inventory management features include landed cost tracking and sync to your accounting system, you eliminate the manual step of calculating COGS per settlement. Without that link, COGS becomes an estimate and your gross margin becomes an approximation. We've gone deeper on the operational side of this in our guide to inventory management for operations managers.

For brands selling across multiple channels — Amazon, Shopify, and wholesale simultaneously — multi-channel inventory operations add further complexity because the same SKU might carry different effective margins per channel once fees are correctly allocated. That's precisely why channel-level sub-accounts matter so much: you can't optimise what you can't measure by channel.

If you want to see what the payout data looks like before it hits your books, our piece on syncing Amazon payouts to Google Sheets is a practical starting point for understanding the raw data structure. And if your books and payouts still don't match after reconciliation, our post on why your Amazon and Shopify payouts don't match your books covers the most common culprits.

Monthly reconciliation against the Seller Central settlement report, using a channel-specific chart of accounts, is the single most effective control for catching fee discrepancies, misclassified refunds, and reserve errors before they become a year-end audit problem.

Frequently asked questions

How do I categorise Amazon referral fees vs. FBA fees in accounting?

Both are direct costs of sale and belong in your cost of sales section of the P&L — but in separate sub-accounts. Referral fees are a percentage of sale price, so account for them in a dedicated Amazon Referral Fees line. FBA fees are per-unit fulfilment costs and belong in an FBA Fulfilment Fees line. Keeping them separate lets you model margin impact independently — particularly useful if you're considering switching fulfilment models.

Should Amazon refunds be recorded as revenue adjustments or expense reductions?

Revenue adjustments — specifically, debit entries to a contra-revenue account such as Sales Returns & Allowances, not expenses. Recording refunds as expenses inflates your gross revenue figure, distorts your gross margin percentage, and misrepresents the economic reality of the sale being unwound. The corresponding COGS entry should also be reversed if the returned item is resellable and goes back into inventory.

What is an Amazon reserve and how do I account for it on my balance sheet?

An Amazon reserve is cash Amazon withholds from your settlement payout as a security buffer against potential refunds, A-to-Z claims, or account risk — it's your money, not Amazon's. Record it as a current asset (e.g. Amazon Reserve — Current Asset) when it's withheld, and reverse that entry when Amazon releases it in a subsequent settlement. Never post reserve amounts to your P&L as an expense; doing so understates your net assets and overstates your costs.

What to do next

If you've read this far, you probably already know that the manual version of this process — downloading settlement files, mapping transaction types, splitting reserves from refunds, posting journal entries by hand — is both time-consuming and error-prone. It scales badly. A brand doing £200,000/month on Amazon with a 5% return rate and biweekly settlements is generating hundreds of individual accounting entries per month before you add Shopify, eBay, or any other channel.

The alternative is a tool built specifically for this problem. Ceendesis Accounting parses Amazon settlement flat files via SP-API — every transaction type, including the ones most tools miss, like reserve movements and reimbursements — and splits each settlement into clean line items: sales, referral fees, FBA fees, refunds, reserves, and tax. Per-product COGS flows through automatically. The output is accrual-correct journal entries posted directly into your ledger, with the channel-level account structure this guide describes already built in. It's built around Xero today, with QuickBooks Online support rolling out — no Sage yet, so if you're on Sage you'll need a different route for now. But if you're on Xero and spending meaningful time each month on Amazon reconciliation, it's worth a look.

And regardless of what tooling you use: get the chart of accounts right first. Everything else — reconciliation, COGS accuracy, channel profitability analysis — depends on having the right GL structure underneath it. That's the foundation, and it costs nothing to set up correctly today. If you want a broader grounding in e-commerce accounting principles before diving into the setup, our complete guide to Amazon seller accounting covers the full picture.