Inventory journal entries record buying, selling, and adjusting stock. The standard debits and credits for each, with worked examples for Amazon sellers.
Debit Inventory and credit Cash (if you paid) or Accounts Payable (if on terms), for the landed cost of the goods. This records the stock as an asset and does not touch your profit and loss, because you have swapped cash for an asset of equal value. The cost only becomes an expense later, when the inventory sells.
What is the journal entry when inventory is sold?
Under perpetual inventory there are two entries. First, record the sale: debit Cash or Accounts Receivable and credit Sales Revenue for the sale price. Second, record the cost: debit Cost of Goods Sold and credit Inventory for the unit's cost. The first captures revenue, the second moves the cost from your inventory asset to COGS so profit reflects the sale.
Andrew Erickson is the founder of Inventory Hero. He has spent years working with Amazon FBA sellers on demand forecasting, restock planning, and the cash flow side of running a private-label brand. Inventory Hero exists because every spreadsheet-based inventory system he tried eventually broke — usually right before Q4.
When a physical count is lower than your books (damage, loss, or theft), debit Cost of Goods Sold (or an inventory shrinkage expense account) and credit Inventory for the cost of the missing units. This writes the lost inventory off the balance sheet and recognizes the cost, keeping your inventory asset equal to what you actually hold.
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Inventory journal entries are the debits and credits that record three events in an inventory business: buying stock, selling it, and adjusting for loss or a count difference. The short version: buying inventory debits an asset (no expense yet), selling it takes two entries (revenue, then moving cost to COGS), and adjustments write off what you no longer have. This is a practical overview, not tax or accounting advice; your accountant or software will tailor the specifics. Below are the standard entries with worked examples.
Quick orientation before the entries: in accounting, a debit increases an asset or an expense, and a credit does the opposite (it decreases an asset or increases a liability or revenue). So "debit Inventory" means your inventory balance goes up, and "credit Cash" means cash goes down. Hold that and the entries below read as logic, not incantations.
Buy 500 units at a 9 dollar landed cost and you debit Inventory 4,500 dollars and credit Cash 4,500 (or Accounts Payable, if you bought on supplier terms). Notice there is no expense and no hit to profit; you swapped one asset (cash) for another (inventory) of equal value. This is the entry that enforces the inventory accounting rule that stock is an asset until it sells.
Then, record the cost of what you sold, moving it from the asset to the expense:
Debit Cost of Goods Sold ........ 9Credit Inventory ........ 9
Sell one unit for 25 dollars that cost 9: the first entry captures the 25 dollars of revenue, and the second moves the 9 dollar cost from Inventory to COGS. Your gross profit on that unit, 16 dollars, falls straight out of the two entries. The cost hits your P&L now, at the moment of sale, which is exactly the timing that keeps profit honest.
When a physical count comes up short (damage, loss, or a miscount), you write the missing inventory off:
Debit Cost of Goods Sold (or Shrinkage) ........ 90Credit Inventory ........ 90
If 10 units at 9 dollars have gone missing, you debit COGS (or a dedicated shrinkage expense) 90 dollars and credit Inventory 90, which removes the lost stock from your balance sheet and recognizes the cost. The reverse happens if a count comes up higher than the books. These adjustment entries are how your inventory asset stays equal to what you physically hold, which is the point of inventory accuracy.
Two more entries show up constantly for an FBA seller. A customer return reverses the sale: you credit back the revenue and, if the unit is resellable, move its cost from COGS back into Inventory. If the returned unit is damaged and unsellable, the revenue still reverses, but the cost does not go back to Inventory; in practice most sellers post it to a damage or loss expense line, so COGS reflects only the cost of units genuinely sold and the loss is visible on its own.
Amazon's fees are their own entries. When you record a settlement, each fee type posts as an expense: debit the specific fee expense (referral, fulfillment, storage, ads) and credit Cash, because Amazon already netted it out of your deposit. This is why booking the lump settlement as one number hides the fee entries entirely, and why the Amazon seller accounting discipline is to record from the settlement detail. Each fee category getting its own line is what makes those expenses visible and manageable.
The entries above are the perpetual approach, cost moves to COGS on each sale. Under a periodic system you do not touch COGS on every sale; instead you count ending inventory at period end and post one entry to true up COGS using the identity COGS equals beginning inventory plus purchases minus ending inventory. Most FBA sellers run perpetual through software because the volume makes per-sale automation practical.
The periodic close is still where you reconcile to a real count, and Amazon adds a wrinkle. To verify COGS and units at period end, sellers pull the Inventory Ledger report (or the Payments Transaction View for the money side) from Seller Central. One thing that trips people up: units in transit from a supplier or a prep center do not show on the FBA ledger until Amazon receives them, so your books and the FBA report can legitimately disagree by whatever is on the water. Track that in-transit inventory separately so the reconciliation gap is explained, not mysterious.
You will rarely hand-post these, so why learn them? Because the automation is only as good as its setup:
Miscategorized fees or costs land in the wrong account and quietly distort margin.
COGS posted at the wrong cost (invoice price instead of landed) overstates profit on every sale.
Missed adjustments leave your inventory asset overstated, which inflates your balance sheet and understates COGS.
Knowing what the correct entry looks like is what lets you, or your accountant, catch these. It is the difference between trusting your numbers and hoping they are right.
Inventory journal entries come down to three events: buying (debit Inventory, credit Cash or Payables), selling (record revenue, then move cost from Inventory to COGS), and adjusting (write off what you no longer have). Software will post most of them, but recognizing the correct entry is how you verify your COGS, profit, and inventory asset are right. For the framework behind the entries, see inventory accounting and Amazon seller accounting.