Bookkeeping Basics for Product Importers

Bookkeeping for importers means recording every cost that moves goods from a factory to your warehouse — purchase price, freight, insurance, customs duties, broker fees, and currency movements — as part of inventory, not as separate expenses. Under the accounting rules most businesses follow (IAS 2 internationally, ASC 330 in the US), inventory is carried at all costs necessary to bring it to its present location and condition, and those costs only hit the income statement as cost of goods sold when the goods actually sell.

That is the theory, and it fits on an index card. The practice is messier: costs arrive in different currencies, land weeks apart, and come from five different vendors. A sourcing partner that documents every cost as it happens makes this far easier, but the books still have to be built right.

What exactly should an importer's books track?

Everything between the factory gate and your customer's door that you pay for, attached to the shipment it belongs to. The cleanest way to think about it is a short list of cost buckets, each recorded against a specific purchase order or shipment:

• Purchase price. What the supplier charges for the goods themselves, usually split into a deposit (often 30%) and a balance payment before or after shipment.
• International freight. Sea, air, or rail charges from the origin port to the destination port, paid to your forwarder rather than your supplier.
• Insurance. Cargo insurance, usually a small fraction of cargo value but easy to forget in the books.
• Customs duties and import taxes. The duty assessed on entry, based on your product's tariff classification and customs value. Your broker typically pays this on your behalf and bills you.
• Customs brokerage and port handling. Broker fees, terminal handling, documentation charges, and any inspection fees.
• Domestic freight and warehousing. Getting the goods from the port to your warehouse, plus storage before they sell.
• Currency conversion effects. The difference between the exchange rate when you recorded the payable and the rate when you actually paid.
• Quality control and compliance. Inspection fees, product testing, and certification costs — real landed costs too.

The habit to avoid from day one is recording only the supplier invoice while everything else drifts into generic expense accounts. Freight and duties expensed instead of added to inventory make margins look wrong in both directions: too high when you buy, too low when you sell.

How do you record landed costs in the books?

Landed costs — freight, insurance, duties, brokerage, and port charges — are added to the cost of inventory, not booked as period expenses. They only become cost of goods sold when the inventory sells.

Work through a concrete shipment to see the mechanics. You order 5,000 units at $2.40 each, so the purchase price is $12,000. Freight is $3,200, cargo insurance is $150, customs duty comes to $960, and broker plus port handling total $450. The landed cost is $16,760, or $3.352 per unit — a full $0.95 more than the unit price on the supplier's invoice. Price your product off the $2.40 figure and you have underpriced it by almost 40%.

The journal entries for this shipment look like this:

• Record the goods: Debit Inventory $12,000; Credit Accounts Payable — Supplier $12,000.
• Record freight: Debit Inventory $3,200; Credit Accounts Payable — Forwarder $3,200.
• Record duties: Debit Inventory $960; Credit Accounts Payable — Customs broker $960.
• Record insurance and handling: Debit Inventory $600; Credit the respective payables.
• Sell 1,000 units: Debit COGS $3,352; Credit Inventory $3,352.

Most small importers don't post these as manual journals. Accounting systems with landed-cost features attach the extra bills to the original purchase receipt and spread them across the items — see this walkthrough of landed-cost allocation mechanics for how it works. What matters is the discipline: every landed-cost bill gets linked to its shipment, and none of it bypasses inventory.

One timing wrinkle is common. The goods often reach your warehouse before the forwarder's or broker's final invoice does. Then accrue the expected amount — debit inventory, credit an accrued-expenses account — and true it up when the real bill arrives.

Your Incoterm decides which of these costs land on you at all. On FOB terms you arrange and record international freight and insurance yourself; on CIF the supplier's quote bundles them, so you see one price but lose visibility into the freight margin — a reason experienced importers tend to prefer FOB once they have a forwarder they trust.

How do you book supplier payments and currency conversions?

Import bookkeeping is multi-currency bookkeeping. Suppliers are commonly paid in USD by wire, or in CNY by local transfer where the banking setup allows it (see this overview of currency options and FX strategies); either way, the exchange rate moves between the invoice date and the payment date, and the books must capture the difference.

The standard pattern works in three steps. First, the deposit: when you pay the 30% deposit, record it as a prepaid supplier balance — an asset, not an expense and not yet inventory. Second, the final invoice: when the supplier issues the full invoice, record the total payable and apply the deposit against it. Third, the balance payment: when you wire the remaining 70%, record the cash out and clear the payable.

Currency conversion enters at each step through the rate actually used. Suppose the supplier's $8,400 balance is recorded at an exchange rate of 0.92 to your home currency — a booked payable of 7,728. Two weeks later you pay at 0.89, so the wire costs you only 7,476. The 252 difference is a foreign exchange gain, recorded on its own line on the income statement. Had the rate moved the other way, it would be a loss. These gains and losses are never folded into inventory cost.

Three habits keep the multi-currency side clean. Record payables at the spot rate on the invoice or payment date, not a rounded rate from memory. Match each bank payment to its supplier bill immediately, while the conversion details are still in the transfer confirmation. And when several milestones or suppliers go out in one bulk transfer, split the lump sum per invoice — booking it as a single line is how payables become unreconcilable.

FIFO, weighted average, or specific identification: which costing method fits your imports?

When you buy the same product at different prices across shipments — and you will, because freight rates, duties, and exchange rates move — you need a rule for which cost leaves inventory first when a sale happens:

Method · How it assigns cost · Best for · Watch out for

• FIFO (first in, first out): The oldest shipment's cost is charged to COGS first; ending inventory reflects the newest costs · Most importers; the accepted default under IFRS · In rising-cost periods, COGS looks lower than replacement cost, which flatters margins
• Weighted average: Each sale uses the average unit cost of all units on hand, recalculated with each new shipment · Frequent, similarly sized shipments with steady pricing · A cheap old batch drags down the average and can hide what new shipments actually cost
• Specific identification: Each unit or batch is tracked at its own actual cost · High-value goods where batches are physically distinct — electronics, machinery · Impractical for thousands of identical units; requires disciplined batch tracking

For most importers, FIFO is the right default. It matches physical reality — you generally sell the oldest stock first — and it is accepted everywhere, which matters if you ever face an audit or a lender's review. Weighted average suits importers whose shipments arrive often and whose unit costs barely move.

Pick one method and apply it consistently period after period — the standards require the same cost formula for all inventories of a similar nature.

How do duties, freight, and broker fees enter the books?

The principle — capitalize into inventory — was covered above, but the practical sequence deserves its own section because these bills arrive through a different pipeline than the supplier's invoice.

Customs duties almost never come from your supplier. Your customs broker clears the shipment, pays the duty to the authorities, and invoices you afterwards — sometimes weeks later. Debit inventory and credit the broker's payable when you have the duty figure, accruing it if the assessment hasn't been finalized. Never book duty as a tax expense: import duties on goods you will resell are part of the goods' cost.

Freight splits in two. Inbound freight — everything up to your warehouse door — capitalizes into inventory. Outbound freight — shipping orders to your customers — is a selling expense, never part of COGS.

Broker fees, terminal handling, demurrage, and port storage follow the inbound rule: they attach to the shipment's inventory cost. Watch demurrage in particular — recurring container storage fees at the port signal an operational problem that accounting can only record, not fix.

If you receive a duty refund — through a drawback program, a reclassification, or a corrected entry — record it as a reduction of inventory cost if the goods are still on hand, or as a reduction of COGS if they already sold. It was never income; it was a cost that came back.

Which documents have to sit behind every entry?

Importer books rest on paperwork more than most businesses' do. File these per shipment, before the month ends:

• Commercial invoice from the supplier, with the Incoterm stated.
• Packing list and bill of lading (or air waybill), proving what actually shipped.
• Freight forwarder's invoice with the transport charges.
• Customs entry documentation and the duty assessment.
• Cargo insurance certificate or receipt.
• Broker invoices for clearance and handling.
• Warehouse receiving report, confirming quantities that arrived.
• Bank transfer confirmations for every supplier payment, with the exchange rate used.

Customs authorities generally require import records to be kept for five to seven years after entry, depending on the jurisdiction. Organize documents by shipment, linked to the purchase order number, so any inventory figure can be traced back to its source. A digital folder per shipment, named with the PO number and arrival date, is enough for most small importers.

The seven bookkeeping mistakes importers keep making

These errors show up again and again in importer books, roughly in order of damage.

1. Expensing freight and duties instead of adding them to inventory. It understates inventory, overstates expenses in the purchase month, then understates COGS when the goods sell — making bad pricing look profitable.

2. Recording only the supplier invoice. The broker's duty bill, the forwarder's invoice, and the insurance receipt arrive through different channels and weeks apart, so they never enter the books. Every shipment needs a checklist, not memory.

3. Booking the 30% deposit as an expense. The deposit is an advance — an asset — until the goods are invoiced and received. Expensing it understates assets and misstates the period's profit.

4. Ignoring foreign exchange gains and losses. When the rate moves between booking and paying, the difference must hit the income statement. Recording the payment at the old booked rate leaves payables that never clear.

5. Mixing inbound and outbound freight. Inbound freight capitalizes into inventory; outbound freight to customers is a selling expense. One combined account destroys margin analysis.

6. No per-shipment landed-cost schedule. Without a landed cost per unit for each shipment, you cannot explain your margins or spot when a duty change or freight spike has eaten your profit.

7. Never reconciling payables. Supplier accounts in USD, broker accounts in your home currency, deposits half-applied — without a monthly reconciliation, balances drift and errors compound.

Frequently asked questions

Should customs duty be recorded as an expense or added to inventory cost?

Added to inventory cost. Both IAS 2 and ASC 330 include duties among the costs of bringing inventory to its present location and condition, so import duties on goods you intend to resell capitalize into inventory and reach the income statement as part of COGS when the goods sell.

Can an import business use cash-basis accounting?

It depends on your jurisdiction and size, but inventory-heavy import businesses generally must use accrual accounting past small-business thresholds. Cash basis cannot produce a meaningful inventory figure or match COGS to sales, which is the whole point of importer bookkeeping.

How do I account for samples and quality-control costs?

Samples you keep or give away are an expense — usually marketing or product development — recorded at their landed cost if you have it. Pre-shipment inspection fees for a production run are part of getting those goods into saleable condition, so many importers capitalize them into that shipment's inventory; ongoing supplier-audit costs are treated as operating expenses.

What exchange rate should I use when recording a supplier invoice?

The actual rate — the spot rate on the invoice date, or the rate your bank or payment provider applied if you paid immediately. Avoid rounded or remembered rates; the difference seems trivial per invoice but compounds across a year of orders and leaves payables permanently out of balance.

Do I need an accountant, or is bookkeeping software enough?

Software handles the mechanics — invoices, bills, multi-currency, inventory — but it cannot choose your costing method, design your chart of accounts, or confirm your duty treatment. A common setup: monthly bookkeeping yourself in software, plus a quarterly structural review and year-end work by an accountant.

How do I track inventory that is still on the water?

Keep it on the balance sheet in a separate account — "inventory in transit" or "goods in transit" — rather than mixing it with warehouse stock. Record the supplier invoice and accrued landed costs there when the goods ship, then transfer the full landed cost into regular inventory when the warehouse confirms receipt. This keeps stock counts honest and purchasing decisions based on what is actually available to sell.

Set up your importer books this week

If this article leaves you with one decision rule, make it this: every dollar you spend getting goods to your warehouse attaches to those goods in the books, and everything you spend getting them to your customer does not. Apply that sentence to every bill on your desk and your chart of accounts will sort itself out.

The starting order is short. Set up a chart of accounts with separate inventory, in-transit, and landed-cost tracking before your next shipment. Link every freight, duty, and broker bill to its purchase order instead of expensing it. Pick FIFO or weighted average and document the choice. Reconcile supplier and forwarder balances monthly.

Clean books also start at the source. When a sourcing partner records every supplier invoice, payment milestone, and inspection report against your order, your bookkeeper gets a complete paper trail instead of a puzzle — which is exactly what CN Ally's product sourcing documentation is built to provide. If your current records are a mix of chat screenshots and half-remembered payments, email hi@cnally.com.