Accounting, simply, is the recording of financial transactions. For your online store, the 'Order' coupled with the linked 'Payment' is a transaction. There are 2 common ways to record your transactions depending on the stage of your business:

1. Record every transaction: This is one of the most recommended practices if you have 1-2 channels on which you sell (eg. Shopify and Amazon). When you have 100-1000 orders a month, recording every invoice with the customer data makes a lot of sense. It lets you see the sales by customer and gives you greater control on the numbers.
2. Record summary transactions weekly or monthly: If you have hundreds of orders coming in every day, recording transactions individually in your accounting tool can be daunting. Expert E-Commerce accounting CPAs advise this if you are doing multi channel sales. At this level, your accounting application doesn't meet your CRM (Customer Relationship Management) needs. So a summary transaction of your sales by channel is the important financial metric.

Example below:

In addition to transactions, it's essential to record the following:

Inventory on Hand: Inventory is one of the primary business assets in your ecommerce business. The inventory count tells your store's

Goods on Hand. Do you want to invoice and deliver orders within the shortest possible time?

Cost of Goods Sold (COGS) When acquiring inventory to sell on your website, you are exchanging cash for inventory asset. The challenge lies in the fact that the cost cannot be deducted till you sell. When it sells, your COGS should be updated appropriately. COGS reporting is a way to track your costs associated with each item that sells from your store. Here' s a simple formula to calculate Cost of Goods Sold: