Although it may seem that accounting for sales of products in e-shops is not very different from accounting for sales in real retail stores, the opposite is true. Declaring of sales in the case of electronic shops has its specifics and not everyone running an e-shop is aware of those.

E-shops usually offer three different ways of handover for sale and delivery: personal pick-up in store, cash on delivery (whether it is delivered by Czech post or a courier company), and payment prior to delivery. The combination of way of payment and way of delivery is key for defining the moment for declaring of sales.

In case of personal pick-up in store and payment in store during pick-up will the sale, VAT and the removal of goods be declared the moment the customer receives the goods.

Payment in advance by the customer (card payment or bank transfer) makes it obligatory to pay the value added tax from the money received. After payment, the goods will either be picked up by the customer or it will be delivered to them by a courier company. The sale is declared according to the Czech accounting standard no. 001, meaning it is declared the moment of handover to the customer even if the goods are being delivered by a courier because in such cases the customer does not take responsibility for the goods in case of loss or damage during delivery. Simultaneously with the declaration of sale the derecognition of goods from store stock should happen. In terms of keeping a register of your goods we suggest to claim goods that have left your store but haven’t reached the customer yet as goods on the way.

In case of cash on delivery, similarly to the above stated example, the sale is declared the moment the customer takes over the goods, not in the moment the goods are shipped. Not only does no sale arise in the moment of shipment but we cannot even account for receivables because the customer doesn’t own anything in the moment the goods are given to the courier company. Such receivables could not be collected nor assigned. The removal of goods is registered in the same moment as the declaration of sale.

Another thing that is specific for e-shops is the obligation to refund purchases of dissatisfied customers during a 2-week period after the sale. For these cases, accounting entities should create a reserve by the financial statements day because in this case a financial obligation for the entity arises with the sale of goods; it is a similar case as with repairs within the guarantee period. After the refund actually takes place a credit note is issued and the reserve dissolved. For these reasons, e-shops whose financial year is the same as the calendar year (and therefore it can be expected that lots of unsuitable Christmas gifts will mean a much larger number of refunds during January than during the rest of the year) are advised to move the date of financial statements to a period with less sales and refunds also. The reason for this is a lower tax burden of corporate tax. The end of December is time for taxation of all transactions and because issued credit notes lower sales, they lower the basis of assessment in the next tax period.

If you would like a consult concerning this topic, don’t hesitate to contact us.