A Beginner’s Guide to eCommerce Accounting [2026]

eCommerce accounting is the system an online business uses to track sales, costs, inventory, tax, and cash flow so the owner can clearly understand whether the business is actually making money.

In 2026, starting an online store is easy. Understanding the financial side is not. Many eCommerce businesses generate sales but still struggle with cash, tax obligations, and profit clarity. This usually happens because accounting is either ignored, oversimplified, or treated as something to fix later.

This guide explains eCommerce accounting from the ground up in simple Australian English. It is written for beginners who want clarity, not accounting jargon, and who want to build an online business that is financially stable, not just busy.

What eCommerce Accounting Includes (and Why It Matters)

eCommerce accounting is not just bookkeeping or tax reporting. It is the system that shows you what is really happening inside your business.

At a practical level, it covers how much customers pay, how much it costs to sell each product, how much tax you owe, and how much cash is actually available to run the business. It also shows patterns over time, such as which products perform well and where money is quietly leaking.

Without proper accounting, decisions are often made emotionally or based on sales numbers alone. With proper accounting, decisions are based on facts.

GST Basics for eCommerce Businesses (Quick Overview)

If you are running an eCommerce business in Australia, GST is something you need to think about early — even if you are just starting out.

You must register for GST when your business turnover reaches $75,000, or if you expect it to reach $75,000 within the next 12 months. This includes online sales, not just money that hits your bank account.

Once registered, you are required to:

• Charge 10% GST on most Australian sales
• Lodge BAS, usually quarterly
• Report GST collected from customers and GST paid on business expenses

Not all sales include GST. Some products are GST-free, and many overseas sales are treated differently. However, GST collected from Australian customers is not your money. It must be tracked separately and paid to the ATO.

For most e-commerce businesses, a clean GST setup from day one saves a lot of stress later.

Bonus Resources: GST Calculator

Cash vs Accrual Accounting: Which Should You Use?

One early decision every eCommerce business needs to make is whether to use cash or accrual accounting.

Cash accounting records income and expenses only when money moves in or out of your bank account. It is simpler and easier to understand, which is why many very small businesses start this way.

Accrual accounting records income when a sale happens and expenses when they are incurred, even if money has not changed hands yet. This gives a more accurate picture of performance, especially when stock, payment delays, and refunds are involved.

For eCommerce businesses that carry inventory or are planning to scale, accrual accounting is usually the better option. It aligns sales, costs, and inventory properly and avoids distorted profit figures. Cash accounting may feel easier, but it becomes limiting once the business grows.

Practical Setup Checklist for eCommerce Accounting

Setting up accounting properly at the start does not need to be complicated. What matters most is getting the foundations right.

First, choose cloud accounting software that works well with online businesses, such as Xero or QuickBooks Online. The specific tool matters less than setting it up correctly.

Next, connect your business bank account so transactions flow into the system automatically. Where possible, also connect your payment gateways so sales and fees are captured accurately.

Then, set up a simple, eCommerce-friendly chart of accounts. This usually means keeping things separate rather than lumped together. Sales should be split by channel if possible. Payment processing fees should have their own account. Shipping income and shipping costs should be separate. Inventory and cost of goods sold should be clearly defined. Advertising, software subscriptions, and owner drawings should not be mixed into general expenses.

Finally, decide on a reconciliation rhythm. At a minimum, reconciliation should be done weekly. During busy periods or high sales volume, doing it more often makes it easier to spot issues early.

This setup does not need to be perfect. It just needs to be consistent.

A Note on Marketplaces and Overseas Sales

Selling through marketplaces or to overseas customers adds extra complexity.

Marketplaces often handle GST, fees, and payouts differently from direct website sales. Overseas sales may involve foreign currency, exchange differences, or different tax treatment.

If you sell internationally or through large marketplaces at scale, it is worth getting advice early to ensure sales, fees, and GST are recorded correctly. Small mistakes in these areas can grow quickly as volume increases.

Step-by-Step Example: How One Online Sale Is Recorded

This section walks through a complete example so the process is clear from start to finish.

Step 1: Purchasing Stock

An Australian eCommerce business buys 100 reusable bottles from a supplier for $2,000, including delivery.

This $2,000 is recorded as inventory. At this point, no expense is recorded, and no profit or loss is affected. The business has simply converted cash into stock.

Step 2: A Customer Places an Order

A customer buys one bottle for $110, including GST.

The accounting system records the sale immediately:

• $100 as sales revenue
• $10 as GST collected

The money has not yet reached the bank, but the sale has occurred.

Step 3: Payment Gateway Fees Are Applied

The payment gateway charges a $3 processing fee.

This $3 is recorded as a payment processing expense. It explains why the full $110 will not arrive in the bank.

Step 4: Payout Reaches the Bank

A few days later, $107 arrives in the business bank account.

This deposit is matched to the original sale during reconciliation. The accounting system now shows how the $110 sale turned into a $107 deposit.

Step 5: Inventory Is Adjusted

The cost of one bottle is $20.

At the time of sale, $20 is moved from inventory to cost of goods sold. This reflects that one unit has been sold and is no longer an asset.

Step 6: GST Is Tracked Separately

The $10 GST collected is not income. It is tracked separately so it can be reported and paid through BAS.

Step 7: Profit Is Calculated

From this single sale:

• Revenue is $100
• Product cost is $20
• Payment fee is $3

The gross profit is $77 before other business expenses such as advertising or software.

This example shows why skipping steps leads to incorrect profit figures.

Why eCommerce Accounting Is Different from Traditional Business Accounting

In a traditional business, money usually changes hands immediately. A customer pays, the business receives the money, and the transaction is complete.

In e-commerce, money moves in stages.

A customer pays online, the payment provider holds the funds, fees are deducted automatically, payouts are delayed, and refunds can happen days or weeks later. At the same time, the business may be paying for stock, advertising, shipping, and software before any customer money reaches the bank account.

Because of this, eCommerce accounting focuses on tracking transactions accurately over time, not just watching the bank balance.

Practical Accounting Tips Every eCommerce Business Should Understand

Many e-commerce accounting problems don’t come from complex rules. They come from misunderstanding how money actually moves in an online business. The following tips explain the most important concepts beginners need to get right, with practical examples so the logic is clear.

Tip 1: Do Not Confuse Revenue with Money in Your Bank

One of the most common beginner mistakes is assuming revenue is the same as money received.

In eCommerce, revenue is recorded when a customer places an order, not when the payment lands in your bank account. This matters because online payments rarely move instantly or cleanly. Fees are deducted automatically, payouts are delayed, and refunds can happen later.

For example, a customer pays $220 for an order, including GST. The payment gateway deducts fees and sends $213 to your bank two days later. If you only record the $213, your revenue will always look smaller than it actually is. At the same time, GST collected and fees paid are hidden.

Good accounting records the full sale first, then explains the difference between the sale amount and the bank deposit through fees, tax, and timing. This is the only way to understand real performance.

Tip 2: Always Separate Sales, GST, and Fees

When a customer pays online, the full amount does not belong to the business.

Part of the payment is GST that must be passed on to the ATO. Another part may be payment processing fees. Only the remaining amount is revenue the business actually earns.

For example, if a customer pays $110:

• $100 is sales revenue
• $10 is GST collected
• a few dollars may be taken as gateway fees

If these are not separated in your records, profit figures become misleading and BAS reporting becomes painful. Separating these amounts from the start keeps everything clear and prevents last-minute fixes at tax time.

Tip 3: Understand That Payment Gateways Distort Bank Statements

Payment gateways are essential for e-commerce stores, but they make bank statements confusing.

Gateways often group multiple customer payments into one payout, deduct fees before sending money, and process refunds separately. As a result, your bank statement rarely matches your sales reports line by line.

This does not mean something is wrong. It means your accounting system must explain the difference.

Good eCommerce accounting records customer sales first, then uses reconciliation to show how those sales turn into bank deposits. This prevents under-reporting revenue and hiding expenses inside deposits.

Tip 4: Reconciliation Is How You Confirm You Were Actually Paid

Reconciliation simply means checking that everything adds up.

It involves matching customer orders to payment gateway reports and then matching those reports to bank deposits. Any differences should be explainable through fees, refunds, or timing delays.

For example, if your store shows $15,000 in sales for the month but only $14,300 arrived in the bank, reconciliation will show exactly where the difference went. Without reconciliation, missing payouts or duplicated transactions can go unnoticed for months.

For eCommerce businesses, reconciliation is not an accounting extra. It is a basic control that protects cash flow.

Tip 5: Treat Inventory as an Asset, Not an Expense

Inventory is often the biggest cost in an eCommerce business and the most misunderstood.

When you buy stock, you have not lost money. You have converted cash into products. Until those products are sold, their value still belongs to the business.

Only when a product is sold does its cost become an expense. This timing matters because recording inventory purchases as expenses immediately can make profits appear lower in some months and higher in others.

Proper inventory accounting ensures profits reflect actual sales, not purchasing patterns.

Tip 6: Understand Cost of Goods Sold Before You Analyse Profit

Cost of goods sold (COGS) represents the direct cost of selling a product.

In eCommerce, this usually includes the wholesale product cost, packaging, and freight directly related to preparing the item for sale. It does not include advertising, software subscriptions, or general business costs.

For example, if you sell a product for $80 and it costs $30 to buy and package, your gross profit is $50 before any other expenses. Without separating COGS from operating costs, it becomes impossible to judge product profitability accurately.

Tip 7: Do Not Underestimate Operating Expenses

Beyond product costs, eCommerce businesses have many ongoing operating expenses.

Advertising, platform subscriptions, apps, software tools, shipping services, and customer support systems all add up. Individually, these expenses may seem manageable. Together, they determine whether the business is sustainable.

Accurate tracking allows you to see whether increased sales are actually improving profitability or simply increasing workload and costs.

Tip 8: Treat GST as Money You Are Holding, Not Earning

If your business is registered for GST, the GST you collect does not belong to you.

It must be tracked separately and reported through BAS. When GST is mixed into revenue figures, businesses often overspend and struggle at BAS time.

Clean accounting records make GST reporting straightforward. Messy records turn BAS into a stressful and expensive exercise.

Tip 9: Profit and Cash Flow Are Not the Same Thing

Profit shows whether the business works on paper. Cash flow shows whether it can survive day to day.

E-commerce businesses often face cash flow pressure due to inventory purchases, delayed payouts, and refunds. A business can be profitable and still run out of cash.

Good accounting highlights these risks early so they can be managed rather than reacted to.

Tip 10: Use Software to Create Clarity, Not Complexity

By 2026, most e-commerce businesses rely on cloud accounting software connected to their online store and bank accounts.

Automation reduces manual work and errors, but only when systems are set up correctly. The goal is clarity, not complicated reports that no one reads.

A good setup gives business owners confidence in their numbers without requiring them to become accountants.

Tip 11: Know When to Get Professional Help

You do not need to manage everything yourself.

A bookkeeper helps keep daily records accurate and up to date. An accountant helps with compliance, tax planning, and long-term decisions. Together, they remove financial blind spots and support sustainable growth.

Other Important eCommerce Accounting Items (and Where to Record Them)

Even when sales, expenses, and GST are recorded correctly, some accounting items are often missed. These don’t always cause problems straight away, but they quietly distort profit, cash flow, and tax figures over time. Recording them properly keeps your numbers trustworthy.

Refunds and Returns

Refunds should never be recorded as a new expense.

When a refund is issued, it reverses part or all of the original sale. This also affects GST and, in some cases, inventory. If the returned item can be resold, stock should be increased. If it cannot, the cost should be written off.

Recording refunds correctly prevents overstated revenue and incorrect GST reporting.

Where to record it in accounting software:
Sales → Credit note or refund linked to the original sale
Inventory → Increase stock (if resellable)
Expenses → Refund or dispute fees (if charged)

Chargebacks and Disputes

Chargebacks are different from normal refunds and often include extra fees.

The original sale should be reversed, and any chargeback fees should be recorded separately as an expense. Treating chargebacks as general expenses hides revenue issues and distorts sales performance.

Where to record it in accounting software:
Sales → Reversed sale or credit note
Expenses → Chargeback or dispute fees account

Discounts and Promotions

Discounts reduce revenue at the time of sale and should not be treated as marketing expenses after the fact.

Recording discounts correctly helps you understand true pricing performance and margins. It also ensures GST is calculated on the correct sale amount.

Where to record it in accounting software:
Sales → Discount applied directly to invoice or sale
Reports → Revenue reflects a discounted amount

Store Credit and Gift Cards

Store credit and gift cards are not income when issued.

They represent an obligation to provide goods or services later. Income is only recognised when the credit or gift card is used.

Recording these correctly avoids overstated revenue.

Where to record it in accounting software:
Liabilities → Store credit or gift card liability account
Sales → Recognised when credit is redeemed

Shipping Charges Collected from Customers

Shipping charged to customers is income and should be recorded separately from product sales where possible.

This makes it easier to see whether shipping is being subsidised or priced correctly.

Where to record it in accounting software:
Sales → Shipping income account
GST → Applied if required

Shipping and Courier Costs Paid by the Business

Courier and freight costs paid to shipping providers are operating expenses.

They should not be offset against shipping income, as doing so hides the true cost of fulfilment.

Where to record it in accounting software:
Expenses → Freight, delivery, or courier costs

Inventory Adjustments and Write-Offs

Damaged, expired, or unsellable stock must be removed from inventory.

If this is not done, inventory values and profit figures become inflated. Regular reviews prevent this problem.

Where to record it in accounting software:
Inventory → Stock adjustment or write-off
Expenses → Inventory loss or write-down

Advertising and Marketing Spend

Advertising is one of the largest ongoing costs in eCommerce and should be tracked carefully.

It should not be included in cost of goods sold. Separating advertising from product costs keeps gross profit meaningful.

Where to record it in accounting software:
Expenses → Advertising or marketing expense account

Software Subscriptions and App Fees

Monthly subscriptions and app fees are operating expenses.

Because these are often small but frequent, they are easy to overlook. Over time, they can significantly impact profitability.

Where to record it in accounting software:
Expenses → Software or subscription expenses

Owner Drawings and Personal Transactions

Money taken out by the owner is not a business expense.

Personal spending paid from the business account should be recorded as drawings, not costs. This protects profit figures and simplifies tax reporting.

Where to record it in accounting software:
Equity → Owner drawings or personal withdrawals account

Loan Repayments and Interest

Loan repayments include two parts: principal and interest.

Only the interest portion is an expense. The principal reduces the loan balance.

Recording this correctly ensures profit figures are accurate.

Where to record it in accounting software:
Liabilities → Loan account (principal)
Expenses → Interest expense

Foreign Currency Transactions

Sales or expenses in foreign currencies can create small gains or losses due to exchange rate changes.

These differences should be recorded so profit figures remain accurate.

Where to record it in accounting software:
Income or expenses → Exchange gain or loss account

Record Keeping and Attachments

Good accounting relies on good records.

Invoices, receipts, gateway reports, and bank statements should be attached to transactions where possible. This reduces stress during reviews and audits.

Where to record it in accounting software:
Attachments → Linked to each transaction

Why These Details Matter

Most e-commerce accounting issues are not caused by big mistakes. They come from small things, such as being recorded in the wrong place or not recorded at all.

When everything is consistently recorded in the right accounts, reports become reliable, BAS becomes easier, and decisions are based on facts instead of guesses.

Final Thoughts

eCommerce accounting is not about numbers for the sake of numbers. It is about understanding your business clearly.

When accounting is done properly, pricing decisions improve, cash flow stabilises, and growth becomes intentional rather than accidental. For beginners in 2026, learning these fundamentals early creates a strong foundation for long-term success.

Bonus Content: Is e-commerce worth it?