Cost of Goods Sold Archives

Tracking eBay purchases as Inventory

Seller Ledger on October 20, 2025

We’ve been getting more and more requests from our resellers asking for ways to better automate inventory management, in this case then they source from eBay. It is possible to track eBay inventory purchases as Inventory, but it takes a little bit of adjusting. Here are the key steps:

Step 1: Get your eBay purchase history in the right format

First of all, you’ll need to request your purchase history from eBay, which should get you a list that looks like this:

Next, you will need to copy and paste the table information from this page into a spreadsheet and save it as a CSV formatted file. Fortunately, because the data is laid out in a table format, copying and pasting should work quite well. Having your data in this format will allow you to easily upload the details to Seller Ledger.

Also, make sure to to delete any items that were purchased for personal use.

Step 2: Remove and rename columns

Deleted the following columns, which are not supported by our inventory upload feature:

Purchase Date
Item ID
Individual Price
Transaction Shipping Fee
Currency
Seller Name

Note: because the total cost column amount includes the Transaction Shipping Fee amount, that amount will be properly divided among the quantity of the items and be included in the item costs.

Rename the Listing Title column to “product name” and the Total Price column to “total cost” to match the column headers we require.

Step 3: Create unique SKUs for each product

The most important step now is to add a new column, titled “sku” and to create unique SKUs for each item in this file. Then, when you list them on eBay, record them in the Custom label (SKU) field. That will ensure that we can tie the sale back to the item cost.

Step 4: Upload your inventory to Seller Ledger

Lastly, to load this cost information into Seller Ledger, just go to the Inventory tab and click the “Add Inventory” button. Record the date that you are uploading this information, “eBay” as “Purchased from” and enter the total amount of all of the items (which you can add up in the spreadsheet.) Then click the button near the bottom of the screen that says “Upload inventory”, choose the file, and click save. Within a few minutes, it should show as a single large purchase of items with all of the cost details broken down.

That’s it! Hopefully that saves a bunch of time for those of you sourcing inventory from eBay.

Giving away inventory for promotion

Seller Ledger on October 16, 2025

Do you sometimes give away some of your inventory for promotional purposes? Or do you sometimes have to return inventory to a vendor? If so, how to you handle the accounting for that?

To date, Seller Ledger has treated manually removed inventory as shrinkage. But no longer. Today, we add support for additional reasons.

Let’s take the example of giving away inventory items for promotional purposes. When you go into your Inventory ->In Stock view, click the “Remove stock” button:

You will then be presented with an updated form. Click on the new “Type” field to choose a reason for this inventory removal. Notice that “Shrinkage” is still an option, but you also now have the flexibility to choose a different expense option.

When you choose “Custom Expense”, in addition to asking for the specific product that you are removing from inventory, we also ask for an expense category. In this case, because we’re using the inventory item as a promotional giveaway, we’ve chosen “Advertising” as the category.

Give away inventory for promotional purposes

What’s happening behind the scenes?

Normally, when you sell an item, or if it breaks (e.g. “shrinkage,) when you reduce your inventory account by the cost of that item, you also add that amount to “Cost of Goods Sold.” However, when you give away an item in your inventory for marketing/promotional purposes, you are still reducing the amount in your inventory, but now you are choosing an operating expense like “Advertising” or another similar category of your choosing.

The reason this might matter to you is the impact it has on gross profit and gross margin calculations. If you were to include giveaway items in your gross profit calculations, you might draw the conclusion that your are earning less on each individual sale than you actually are.

Track cost of goods sold with Poshmark

Seller Ledger on June 13, 2025

Based on a recent question from a customer, we decided to outline the steps to make sure you automate the ability to track cost of goods sold with Poshmark.

As we wrote in a prior blog post regarding eBay and cost of goods sold, it is possible to automate your cost of goods calculations in Seller Ledger when an item sells on Poshmark.

The first step is to create a unique SKU (short for “stock keeping unit”) for each item you list. Next, record the SKU and purchase price (and any other inbounds costs) of that item in Seller Ledger. Finally, when listing your item for sale on Poshmark, make sure to include the unique SKU value in the listing. Doing this is not obvious, as the field is considered “optional” and not exposed by default.

Adding SKU value to your Poshmark listing

When you go to create a new listing at Poshmark, you will see a screen that begins like the following:

Scroll down to the bottom and you’ll see a private section called “Additional Details.”

In order to add a SKU to your listing, you’ll need to open the “Additional details” section by clicking “show details” on the far right. That expands the section to reveal a field for SKU:

Note – there is also a “Cost Price” field in there, but it’s not necessary (nor recommended) to record your costs there, as Seller Ledger should already have the cost information for that item in its records.

That’s it?

Yes, that’s it. What happens form here is that, when your item sells on Poshmark and Seller Ledger imports that sales information into our software, we look for the SKU value and automatically match it to what we show in your Seller Ledger inventory. Once we do that, we reduce the amount of your and automatically update your cost of goods sold expense amount. There is no additional record keeping or analysis that you need to do.

Cash-based Inventory tracking

Seller Ledger on May 8, 2025

A.k.a “The simplest way to calculate cost of goods sold”

There’s a lot of content out there on the internet around inventory, accounting, cost of goods sold and taxes. While it has the potential to be very confusing, we’re going to try to simplify things a bit, especially for small online sellers.

Definitions

The most basic definition of cash-based inventory tracking (versus accrual accounting for inventory) is as follows.

Cash-based

Expense the cost of your inventory when you buy it, regardless of when it sells

Accrual

Expense the cost of your inventory when it sells, regardless of when you bought it

Historically, the IRS pushed most people to use the accrual approach, even if using cash-based accounting for the rest of the business. But we have seen a TON of sellers file this way, and know that some tax pros have dug into this as a legitimate approach. I don’t want to get into any tax advice here, but I will show you how, practically, each approach works, and how they can actually be very, very similar to each other.

Let’s take a look at how you can used cash-based inventory tracking using Seller Ledger. This is actually the default setting when you first start using Seller Ledger. It works by giving you the option to categorize expenses as “cost of goods sold” when you purchase them and deduct the total amount on your tax return. Check out this video tutorial on expensing cost of goods sold to see exactly how that works.

This is the simplest approach you can take. But I want to explain what you’re effectively doing if you file this way.

Understanding the math

If you look at the actual Schedule C form provided by the IRS, yes, line 4 (highlighted in red) does ask for Cost of Goods Sold. But in parentheses, it says “from line 42”. Line 42 comes from Section III.

Here is what Section III of the Schedule C looks like:

The key lines in Section 3 (again, highlighted in red) are Lines 35 (your beginning of year inventory), 36 (the cost of items you purchased throughout the year) and 41 (your end of year inventory.)

As you can see, Cost of Goods is calculated using this basic formula, which we can lay out in a slightly different way:

By simply categorizing all of your purchases as cost of goods sold, you’re basically saying to the IRS, everything I bought, I sold within the same year. As in, if this is my first year selling, my beginning inventory was zero (because I didn’t buy anything the prior year) and my ending inventory is zero, because I’ve sold everything I bought this year. Now, using that same formula above, you would get:

In our example, you’d be declaring a starting inventory balance of $0 and an ending inventory balance of $0. In order for your costs of goods sold to end up at $3,929.72, you would enter that same amount under items purchased for the year.

The only thing that is changing is that, instead of calculating Cost of Goods Sold based on the other 3 values, you are backing into the Purchases value by assuming that opening and ending inventory is zero. That’s all the Cash-method for inventory and cost of goods sold tracking is. In fact, we’ve seen cases where tax professionals are filing returns using a pretty significant, non-zero opening and matching closing inventory balance, and still just declaring that purchases and cost of goods sold are the same.

In fact, the funny secret here is that, for all intents and purposes, cash-based inventory (a.k.a. just writing off your purchases as you make them,) is no different than periodic (or, as well call it, “balance-level”) accrual inventory tracking. The only difference? Whether you actually count up the cost of your unsold inventory at least once a year.

A big limitation

All of the above is meant to outline the easiest way to track inventory for tax purposes. But, the cash-based method for inventory tracking (as well as the periodic/account-level method of accrual accounting) do have a pretty big limitation – they won’t help you figure out how much money you make on each sale or type of product. For that, you are going to want to look into tracking at the item-level (a.k.a. continuous inventory management.)

If you are an eCommerce merchant who wants to keep bookkeeping simple, we strongly recommend giving Seller Ledger a try. We connect directly to LOTS of leading marketplaces and platforms, as well as most banks and credit cards. You can try us for free for 30 days, no credit card required.

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