Accounting for E-commerce Businesses
A complete bookkeeping guide for Estonian online stores — chart of accounts, revenue recognition, inventory valuation, payment processor reconciliation, multi-currency management, and the monthly close process.
5 Key Takeaways From This Page
Recording what Stripe or Shopify deposits in your bank as revenue understates your top line, hides platform costs, and violates accounting standards. Always record gross sales and fees separately.
Stock levels change daily through sales, purchases, returns, and write-offs. An inventory value that is only updated at year-end creates materially incorrect COGS figures in every monthly P&L produced during the year.
Foreign currency orders, supplier payments, and processor settlements must each be converted to EUR at the exchange rate on the specific date of the transaction — not an average rate or the month-end rate.
Each processor — Stripe, PayPal, Shopify Payments, Wise — generates its own transaction history, fee structure, and settlement timing. Each needs its own reconciliation before the monthly close is complete.
A generic chart of accounts built for a service company produces meaningless e-commerce financials. The right structure — with separate accounts for each revenue channel, payment processor, and cost category — makes every report actionable.
What does accounting for an e-commerce business involve? Double-entry bookkeeping that captures gross revenue from each sales channel separately, records all platform fees as cost of revenue, values inventory using FIFO or weighted average, reconciles each payment processor to the accounting system monthly, handles returns and credit notes correctly, revalues foreign currency balances at month-end, and produces a monthly P&L, balance sheet, and cash flow statement. This page covers each of those workstreams in full.
Section 1 — Chart of Accounts for an E-commerce OÜ
How to structure your accounting codes to produce meaningful reports — by channel, by cost type, by processor
Why a Dedicated E-commerce CoA Matters
A chart of accounts designed for a standard Estonian OÜ will have a single ‘Revenue’ account and a ‘Cost of Goods Sold’ account. For an e-commerce business, that structure makes it impossible to answer the most basic management questions: which channel is most profitable, what is my true gross margin after platform fees, how much of my COGS is shipping vs product cost?
1000-1999: Assets | 2000-2999: Liabilities | 3000-3999: Equity | 4000-4999: Revenue | 5000-5999: COGS | 6000-6999: Operating Expenses | 7000-7999: Financial Items
Section 2 — Revenue Recognition: Gross Sales, Returns, and Marketplace Rules
When to recognise revenue, how to handle deferred revenue, and what changes when a marketplace is the deemed supplier
The Revenue Recognition Timing Rule
For e-commerce, revenue is recognised when control of the goods transfers to the customer — typically when the order is shipped for physical goods, or when the digital product is made available for download. Payment received in advance (before shipment) creates a deferred revenue liability. Payment received after delivery (credit terms for B2B) creates a trade receivable.
DR Cash / Stripe: €122.00
CR Revenue (gross sale): €100.00
CR VAT Payable — KMD: €22.00
When a marketplace collects VAT on your behalf, you still record the full gross sale value as revenue in your accounts. The VAT collection by the marketplace is their obligation — it does not reduce your revenue figure.
Section 3 — Inventory Valuation
FIFO vs weighted average — with fully worked examples showing how each method affects COGS and taxable profit
Why Inventory Valuation Method Matters
| Method | COGS (in rising-cost environment) | Closing Inventory Value | Gross Profit Impact | Best For |
|---|---|---|---|---|
| FIFO | Lower (older, cheaper stock sold first) | Higher (recent, higher cost stock remains) | Higher gross profit | Most e-commerce; favoured by IFRS |
| Weighted Average | Higher (blended cost sold each time) | Lower (blended cost remains) | Lower gross profit | High-volume businesses with homogeneous SKUs |
DR COGS — Returns and Write-offs: €340.00
CR Inventory: €340.00
Section 4 — Payment Processor Reconciliation
Stripe, Shopify Payments, PayPal, and Wise — a complete reconciliation framework for each
The Reconciliation Principle — Three Layers
Every payment processor sits between your customers and your bank account. Money passes through three layers: customer charges (gross), processor fees (deducted), and bank settlement (net). Your accounting must capture all three layers, with the gross charge as revenue and the fees as COGS — even though only the net settlement appears in your bank statement.
Gross charges: €18,450 → Less fees: €553.50 → Net settlement: €17,896.50
Difference: €0.00 — fully reconciled
Section 5 — Multi-Currency Management
Recording transactions in foreign currencies, monthly revaluation, and managing FX risk
The Rule: Transaction Date Rate for Every Entry
Every foreign currency transaction must be recorded at the exchange rate on the date the transaction occurs — not an average monthly rate, not the month-end rate. The transaction date rate is what creates an accurate EUR equivalent for each individual sale, purchase, or payment.
| Type | When It Occurs | P&L Impact | Cash Impact |
|---|---|---|---|
| Realised FX gain | When a foreign currency monetary item is settled | Posted to P&L immediately | Yes — cash received differs from recorded EUR value |
| Unrealised FX gain/loss | At month-end revaluation of open foreign currency balances | Posted to P&L; reverses if rate moves back | No — no cash changes hands |
Section 6 — Returns, Refunds, and Credit Notes
The complete accounting treatment — revenue, inventory, VAT, and payment processor effects
Why Returns Are a Multi-Entry Event
DR Revenue — Shopify Store: €100.00
DR VAT Payable — KMD: €22.00
CR Cash — Stripe (refund): €122.00
DR Inventory: €42.00 / CR COGS — Product Cost: €42.00
Section 7 — The E-commerce Monthly Close
Complete checklist from day 1 to day 5 after month-end
Why E-commerce Close Takes Longer Than a Service Business
Stripe reconciliation | PayPal reconciliation | Shopify revenue check | Inventory reconciliation | Returns and credit notes | FX revaluation | VAT calculation | P&L and balance sheet review