Book each sale to a marketplace receivable account (debit) against sales and output GST (credit). Book returns as a reverse entry. When the settlement arrives, debit bank, commission, fees, input GST and tax credits such as TCS and TDS, and credit the marketplace receivable. Anything left in that ledger is an unreconciled difference to investigate.
What a marketplace settlement actually contains
A settlement is not a simple bank receipt. It is a net figure after the marketplace has netted off several items against your sales. Before you pass any entry, read the settlement report and list what it contains:
- Sales for orders delivered or shipped in the period.
- Returns and cancellations that reduce the payable amount.
- Commission and other fees such as fixed fees, shipping or fulfilment charges, as per your seller agreement.
- GST charged on those fees, normally shown on the marketplace's invoice.
- Tax collected or deducted at source, which you claim later as credit.
- Adjustments such as penalties, claim payouts or reversals.
Each of these needs its own ledger, otherwise the bank credit cannot be traced back to orders.
Set up the right ledgers first
Most booking errors come from using one catch-all account. A workable minimum structure is:
- Marketplace receivable (one per marketplace), a current asset.
- Sales and Sales returns, ideally split by marketplace.
- Output GST and Input GST on marketplace fees.
- Commission, Fulfilment and shipping fees and Other marketplace charges as expenses.
- TCS receivable and TDS receivable, as tax credit assets.
- Bank and a Marketplace difference / suspense account for unexplained items.
Your chartered accountant may prefer different naming or grouping. The principle is what matters: every rupee in a settlement lands in a named account.
Journal entries, step by step
- Record the sale. Debit Marketplace receivable for the invoice value. Credit Sales and Output GST as per your tax invoice.
- Record returns. Debit Sales returns and Output GST (reversal, as per your credit note). Credit Marketplace receivable.
- Record the settlement. Debit Bank for the amount received. Debit Commission, fees, Input GST on fees, TCS receivable and TDS receivable for the deductions. Credit Marketplace receivable for the total.
- Clear differences. If the settlement does not tie to orders, post the gap to Marketplace difference and investigate it. Do not force it into sales or commission.
The receivable ledger should trend to zero for each settled period. A growing balance means money is held back, mismatched or unclaimed.
Returns, claims and adjustments
Returns are where marketplace accounts drift most. A return may reduce your payable in a later settlement than the original sale, and a commission refund may or may not follow. Book the return when it is recognised as per your credit note policy, then match the settlement line separately.
For lost or damaged return claims, do not book income until the marketplace confirms the payout. Track each claim as an open case with the order ID, claim date and status, and book the receipt when it appears in a settlement. Penalties and chargebacks should go to a named expense account, so you can review them against your agreement.
Tax lines: confirm rates and treatment
GST on fees, TCS under GST and TDS on e-commerce payouts all appear as deductions or add-ons in settlements. This article does not state rates, because they and the related compliance rules change. Confirm the latest position in:
- Your seller agreement and rate card for commission and fee terms.
- The settlement report and fee invoices for what was actually charged.
- Your GST and TDS returns and credit statements, and your tax adviser, for treatment and claim timing.
Book the amounts as shown in the documents, then check that the credit you claim matches what the marketplace reports.
Month-end reconciliation checks
Before closing the month, check that:
- Marketplace receivable closing balance equals unsettled orders, less returns pending.
- Commission and fees match the agreed terms for each category and order.
- TCS and TDS in your books match the credits shown on your tax portals.
- Every bank credit maps to a settlement ID.
Doing this in spreadsheets works at low volume. As order counts grow, a tool like MarketplaceMetrics by Fundle can reconcile sales and settlements, check fees against agreed terms and track return and recovery cases. For Myntra, Excel reports are reviewed; other marketplaces are in scope discussion.
Worked example
Illustrative example only. All figures are made up to show the mechanics. Assume one settlement period with ₹1,00,000 of sales, ₹10,000 of returns and the deductions below, as taken from a hypothetical settlement report.
| Entry | Debit | Credit | ₹ (illustrative) |
|---|---|---|---|
| 1. Sales | Marketplace receivable | Sales and Output GST | 1,00,000 |
| 2. Returns | Sales returns and Output GST | Marketplace receivable | 10,000 |
| 3. Bank receipt | Bank | Marketplace receivable | 70,000 |
| 3. Commission | Commission | Marketplace receivable | 12,000 |
| 3. Fulfilment fees | Fees expense | Marketplace receivable | 4,000 |
| 3. GST on fees | Input GST on fees | Marketplace receivable | 2,500 |
| 3. TCS | TCS receivable | Marketplace receivable | 700 |
| 3. TDS | TDS receivable | Marketplace receivable | 800 |
Check: ₹1,00,000 less ₹10,000 returns leaves ₹90,000 receivable. The settlement clears ₹70,000 + ₹12,000 + ₹4,000 + ₹2,500 + ₹700 + ₹800 = ₹90,000, so the ledger closes at nil. Any gap would go to the difference account for investigation.
Questions and answers
Should the marketplace be treated as a customer in my books?
In most setups, yes. The marketplace collects from buyers and pays you, so it is usually booked as a debtor through a receivable ledger. Confirm the exact treatment with your chartered accountant, as it depends on your arrangement and invoicing model.
Do I book sales on order date or settlement date?
Book sales when your accounting policy and tax invoicing rules require, typically on dispatch or delivery, not on settlement. The settlement only clears the receivable. Confirm timing with your accountant, because revenue recognition and GST timing may differ.
Where do I book commission and marketplace fees?
Book them to expense ledgers such as Commission and Fulfilment fees, with GST on them in an input GST ledger as per the marketplace's invoice. Verify the amounts against your seller agreement and rate card, not against assumptions.
What if the bank credit does not match my receivable?
Post the unexplained amount to a difference or suspense ledger and trace it to the settlement ID, order IDs, returns or fee lines. Common causes are held-back payouts, unmatched returns and fee overcharges. Clear the suspense account once resolved.