Doing the books of accounts for an e-commerce seller is different from maintaining traditional books of accounts. It gets further complicated if the e-commerce seller is located outside India like Ebay, Etsy etc.
The final books of accounts should match with the GST returns along with the running balance with the E-commerce operator. Generally, these e-commerce operators maintain the balance in foreign currency (generally USD). So, we must make sure the books of accounts match with the reports provided by the E-commerce operator. To overcome this problem, we should use an accounting software which has the multi currency option like Tally etc. In multicurrency software, you can enter a single transaction in multiple currencies like Indian Rupees and US Dollar and able to run report in home currency (ie. Indian Rupees) as well as in other currencies (like USD).
In this article, we are focusing only on accounting for Ebay Sellers in Tally with multi currency. Few important things/logics which you must know before understanding the process of accounting: –
- Ebay Transaction Report – Ebay provides an option to generate this transaction report which has details related to every order, charges, remittance & all other transactions with sellers. This is like an Ebay ledger which we need to reconcile with our books of accounts. You can generate this report in PDF as well as Excel for any period.
- Ebay Financial Statement – Ebay provides an option to generate a Financial Statement which has opening balance, transaction for the period and closing balance in USD. Ebay further provide the option to generate summary report (which only have totals of the transaction) or detailed report (which have details on the order level).
- Tally Setup
- Ebay Account – This should be a Debtors Account having USD as the currency. You need to add USD as one of the currencies in Tally master to set up USD as a currency of a ledger.
- All other accounts like Sales, Sales Return, Ebay Charges etc should have Indian Rupees as the currency.
Whenever any entry is posted in an Ebay Account then it must be in USD amount and the corresponding accounts like sales, bank, Ebay charges etc should be posted in INR. Sometimes, Ebay has transactions in other currencies like AUD, GBP etc which you need to convert in USD on the basis of the “Exchange Rate” column available in the Transaction Sheet.
Note – For the purpose of this article, we have assumed that the LUT is filed by the Ebay Seller so the export is made without charging IGST.
Sales
Nature – Ebay issues sales invoices against each order which a seller received.
Amount – In order to find out all the sales orders, you are required to filter the transaction report on “Order” as Type. Also, for the purpose of recording you should use the Indian rupees for the amount of invoice raised (which is auto generated from the Ebay Portal) and use the USD value available in the column “Gross Transaction Amount”. In other words, we must use the actual conversion rate for booking for each invoice. We can find the actual conversion rate as we have actual sales amount in USD (Gross Transaction Amount) and INR value (on the invoice which is generated from the Ebay Portal which is also reported in GSTR-1).
Accounting Entry – As it is a sale, you are required to enter a sales voucher for each individual sales.
Ebay Account (Debtors) DR (USD)
Sales CR (INR)
Ebay Order Processing Charges/Commissions
Nature – Ebay charges various fees for the order you receive. These include the following charges: –
- Final Value Fee – fixed
- Final Value Fee – variable
- Regulatory operating fee
- Very high “item not as described” fee
- Below standard performance fee
- International fee
- Charity donation
- Deposit processing fee
Amount – In order to find out the total USD fees amount, you are required to sum the values available in the transaction sheet columns for the expenses heading mentioned above. Make sure you convert the individual transaction charges into USD as they are mentioned in the original currency of the order before posting it in Tally. You can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Ebay Fee (Indirect Expenses) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%.
Shipping Charges
Nature – Ebay have tie-ups with the various shippers like FedEx, Aramex etc for shipping the products.
Amount – In order to find out all the shipping charges, you are required to filter the transaction report on “Adjustment” as Type. To further confirm the details, you need to download the Financial statement in PDF which shows the individual breakup of these adjustments which are mostly for shipping. You can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Shipping Charges (Indirect Expenses) DR (IND)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%. Moreover, if you use the courier via Ebay, you cannot take the benefit of GST which Ebay may be paying to the courier company. We do not have more details on this.
Ebay Advertisement Charges
Nature – Ebay provides an option of promoting listing which is more or less in the nature of advertising your product on Ebay website or promoting your product. However, this fee is applicable only if you have received an order. Ebay does not charge this fee if the order is not placed by the customer for the promoted listing.
Amount – In order to find out the total USD fees amount, you are required to filter the transaction report on “Other Fee” as Type and “Promoted Listings – General fee ” as Description. You can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Ebay Advertising Fee (Indirect Expenses) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%.
Ebay Insertion Fees
Nature – Ebay charges insertion fees for the listing of the products. This fee is applicable on the listing of products and not related to the order in any manner. Ebay charges this fee from the registered seller on a monthly basis.
Amount – In order to find out the total USD fees amount, you are required to filter the transaction report on “Other Fee” as Type and “Insertion Fee” as Description. You can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Ebay Fees (Indirect Expenses) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%.
Payment Dispute Fees
Nature – Ebay charges payment dispute fees to resolve the dispute between the registered seller and the end customer. Ebay charges this fee from the registered seller for each dispute raised.
Amount – In order to find out the total USD fees amount, you are required to filter the transaction report on “Other Fee” as Type and “Payment dispute Fee” as Description. You can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Ebay Fees (Indirect Expenses) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%.
Payouts from Ebay
Nature – You received payment from Ebay (after deducting all the charges) for the sales made as Ebay collects all the payment from the end customer. This is referred as Payouts.
Amount – In order to find out all the payments from Ebay, you are required to filter the transaction report on “Payout” as Type. You are required to book all the payout transactions on the actual conversation report. You can find out the actual INR on the basis of the amount transferred into the bank account and the relevant USD amount from the USD value available in the column “Gross Transaction Amount”
Accounting Entry – As this is a payment against the sales, you are required to book it as receipts in the accounting.
Bank DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – You are required to pay RCM on the payment processing charges charged by payment mediators like Payoneer etc. The rate of the RCM is 18% on this.
Payin to Ebay
Nature – Sometimes Ebay asks you to remit the funds back to Ebay due to your overpayment which is generally due to dispute or shipping charges which Ebay post at the end of the month. This is generally referred as Charge or Payin.
Amount – In order to find out all the payments to Ebay, you are required to filter the transaction report on “Charge” as Type. You are required to book all the payin transactions on the actual conversation report. You can find out the actual INR on the basis of the amount punched into the bank account or credit card statement and the relevant USD amount from the USD value available in the column “Gross Transaction Amount”
Accounting Entry – As this is a payment to Ebay against the expenses/sales return, you are required to book it as payments in the accounting.
Ebay (Sundry Debtors) DR (USD)
Bank CR (INR)
Ebay Subscription Expenses
Nature – Ebay offers various subscription plans to the seller according to their business requirements.
Amount – In order to find out all the payments to Ebay, you are required to filter the transaction report on “Other fee” as Type and “Subscription Fee” as Description. You can use the standard conversion rate on the particular date to post these transactions.
Accounting Entry – As this is an indirect expense you are required to book it as indirect expense in the accounting.
Ebay Fees (Indirect Expenses) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Note – For the purpose of GST, registered sellers are required to pay the RCM on it @ 18%.
TDS/Withheld Taxes
Nature – Ebay deduct TDS @1% under section 194O on all the sales made by the seller via Ebay. This is generally referred as Withheld taxes in the Ebay reports.
Amount – In order to find out the total withheld amount, you are required to filter the transaction report on “Withheld tax” as Type. You can find out the actual TDS deposited by Ebay in INR using Form 26AS on quarterly basis and book the transaction on actual conversion rate or you can use the closing monthly rate of USD to INR for posting the INR value of the transaction.
Accounting Entry – As this is an TDS deducted by Ebay, you are required to reduce the receivable and book the TDS in accounts
TDS (Deposit Assets) DR (INR)
Ebay (Sundry Debtors) CR (USD)
Refunds/Claims
Nature – Refunds/Claim is more or less sales return. Generally, Ebay uses refunds when the seller himself posts a refund to the customer and Claim in case the customer claims a refund for the product which is faulty, damaged etc.
Amount – In order to find out all the sales return, you are required to filter the transaction report on “Refunds” or “Claim” as Type. Also, for the purpose of recording you should use the actual conversation rate for the sales return on the basis of the actual sales invoice already raised at the time of booking sales.
Accounting Entry – As it is a sale return, you are required to enter a sales voucher for each individual return.
Sales DR (INR)
Ebay Account (Debtors) CR (USD)
Other Things Related to Accounting for Ebay Sellers
Reconciliation of Ebay Ledger balance
Ebay provides the option to generate the Financial Statements for any period which shows the opening balance, transactions and closing balance with Ebay on a particular date. This is the complete ledger statement of our accounts in Ebay which is very important to reconcile for the purpose of proper bookkeeping and audit trail.Once you enter all the transactions appearing in the transaction statement, the balance will get matched with the Financial Statement.
Note – In order to reconcile the Ebay closing balance, you first need to match the transaction totals (under various heads) appearing in the transaction sheet with the total mentioned in the Financial Statements. We have experienced the difference in both the reports due to some orders which are received at the end of the period. In other words, transaction sheets have all the order details, however the Financial Statements have skipped a few orders which were received at the end of the day. So, you need to remove those orders from the transaction sheet at the time of posting the transaction in Tally.
Final Reconciliation with GST Returns
You can find out total sales and sales returns from the Profit and Loss statement in Tally as we have posted all the transactions in INR as well as USD. The net sales appearing in the Profit and Loss should exactly match with the GST sales as all the transactions are posted on the actual basis. If there is any variance then you need to work out the reason for such variance. You should work on the reconciliation with GST return once your Ebay running balance gets reconciled.
Recording of Advance orders at year end
Every year some orders which are placed during year end dates are fulfilled by Ebay Seller after the year end in the new Financial year but Ebay reports the same in year end on the date of placing the order. So these orders are required to be accounted as Advance orders. We have to do this entry each year in order to match the ledger balance of Ebay which is very important. Next year we can book them as sales once the orders are fulfilled.
Accounting Entry – As it is an advance against sales, you are required to enter a journal entry to adjust the sales in the books of accounts: –
Sales DR (INR)
Ebay Advance Order (Current Liability) CR (USD)
Recording for GST paid under RCM
The accounting entry for posting GST under RCM is required to be passed in books of accounts on the date of self invoicing by the seller.
GST Receivable DR (INR)
GST Payable (RCM) CR (INR)
To know in detail read GST Compliances for Ebay Sellers.
Foreign Exchange Currency rates
As we are dealing in foreign currency, we must have some foreign exchange gain or loss due to change in the currency valuation. Tally shows you the foreign exchange gain or loss itself on the basis of the conversion rate used for the opening date and closing date. Tally also provides you an option to set up the exchange rate for a particular date for a particular currency which will be used to find out the net gain or loss due to change in currency rate.
