Every ecommerce business ends up holding some inventory that simply won’t sell, and how that gets handled in your books is often overlooked until it becomes a genuinely material figure. Dead stock inventory, including items that are damaged, expired, obsolete, or otherwise unsellable, needs to be written down or written off your books rather than left sitting at its original cost. Carrying dead stock inventory at full value overstates your assets and misrepresents your real financial position.

Dead Stock and Inventory Write-Offs: How to Account for Unsellable Ecommerce Inventory

Every ecommerce business ends up holding some inventory that simply won’t sell, and how that gets handled in your books is often overlooked until it becomes a genuinely material figure. Dead stock inventory, including items that are damaged, expired, obsolete, or otherwise unsellable, needs to be written down or written off your books rather than left sitting at its original cost. Carrying dead stock inventory at full value overstates your assets and misrepresents your real financial position. Under the lower of cost or net realisable value principle, inventory should be valued at whichever is lower: its original cost or what you could actually realistically sell it for now. Because dead stock has a net realisable value of zero or close to it, proper inventory valuation is essential. Getting this right matters both for accurate financial reporting and because unsold, unaccounted-for dead stock quietly distorts your margin calculations and inventory turnover figures long after it stops being sellable. A business that never addresses its dead stock accounting can end up looking more profitable and more asset-rich on paper than it actually is, which affects everything from tax calculations to decisions about future purchasing.

What Counts as Dead Stock

Dead stock covers several distinct scenarios: inventory that is physically damaged and cannot be sold as new, seasonal or trend-driven products that missed their selling window, items superseded by a newer version, and stock that has simply sat unsold for so long it is no longer commercially viable at any reasonable price. Each of these represents the same underlying accounting problem even though the cause is different: inventory carried on your books at a value it can no longer realistically achieve. Seasonal ecommerce sellers in particular tend to accumulate dead stock predictably around the same points each year, which makes it worth building a routine review into the calendar rather than discovering it unexpectedly.

Identifying Obsolete Inventory Early

Recognising obsolete inventory before it completely drains your warehouse space involves monitoring aged inventory reports across all sales channels. When products stop moving for 90 to 180 days, they transition from slow-moving stock into potential dead stock. Setting clear internal thresholds helps merchandising teams decide whether to deploy a rapid liquidation strategy or prepare for an official inventory write-off.

The Difference Between a Write-Down and a Write-Off

A write-down reduces the recorded value of inventory to reflect a lower net realisable value while the stock still has some worth, perhaps sellable at a discount or through a liquidation channel. A write-off removes the inventory’s value entirely, treating it as a total loss when it has no realistic remaining sale value at all, whether that is because it is damaged beyond use or genuinely worthless in the market. Both reduce your reported asset value and flow through as an expense, but distinguishing between them matters for accurately representing what has actually happened to that stock.

How a Write-Off Actually Affects Your Books

When inventory is written off, its value is removed from your inventory asset account and recorded as an expense, typically flowing into the cost of goods sold or a dedicated write-off expense line. This process reduces both your reported inventory value and your net income for that period.

To execute this correctly, finance teams must process a proper inventory write-off journal entry ecommerce setup. Typically, this involves debiting your write-off expense account (or cost of goods sold) and crediting your asset inventory account. This is a real cost showing up in your books, not a symbolic entry. Dead stock represents cash that was spent on inventory that will never generate revenue, and recognising that loss accurately is part of understanding your true profitability rather than carrying an inflated asset figure that overstates how healthy your business actually is.

Step-by-Step: How to Write Off Unsellable Inventory

Knowing how to write off unsellable inventory ensures compliance with standard accounting frameworks while keeping your balance sheet clean. Here is the standard workflow followed by professional ecommerce accountants:

• Audit and Verify: Conduct a physical count or cross-reference fulfilment centre reports to isolate unsellable units.
• Determine Valuation: Assess whether the items hold any salvage value (requiring a write-down) or zero value (requiring a full write-off).
• Record the Journal Entry: Credit the asset account to remove the inventory value and debit the appropriate expense account.
• Adjust Reporting: Update your general ledger and reconcile your sub-ledgers so that your accounting software matches physical stock realities.

Why This Gets Missed in Ecommerce Specifically

Ecommerce sellers managing inventory across multiple channels or fulfilment methods, particularly through platforms like Amazon FBA, can lose visibility into genuinely dead stock sitting in a fulfilment centre or warehouse. Because remote stock does not show up as an obvious physical problem the way a damaged item on a local retail shelf might, it is easy to overlook. Regularly reviewing aged inventory reports and reconciling them against your actual sellable catalogue is what catches dead stock before it sits unaccounted for indefinitely, distorting your inventory valuation and margin figures for longer than necessary.

Where Accurate Books Support This Process

While Link My Books doesn’t manage inventory valuation or dead stock write-offs directly, it does make sure the sales, fee, and tax side of your accounting is accurately categorised and posted into Xero or QuickBooks Online, giving you and your accountant a reliable financial baseline to work from when reviewing inventory health alongside it. Rules-based tax mapping applied consistently to every settlement, the same mechanism that caught a flat, incorrectly applied tax code for Marc Dady of DadyBros, corrected within about an hour and recovering £8,829 in overpaid VAT, reflects the same principle that matters for inventory accuracy, catching what’s wrong before it compounds. Link My Books holds a 4.9 out of 5 rating on Capterra from 117 reviews as of August 2026, trusted by sellers who need every part of their accounting handled accurately.

FAQ

What’s the difference between a write-down and a write-off for dead stock?

A write-down reduces inventory value to reflect a lower but still positive net realisable value, while a write-off removes the value entirely because the stock has no realistic remaining sale value at all.

How does writing off dead stock affect my profit figures?

It reduces your reported net income for the period, since the write-off is recorded as an expense. This reflects a real economic loss, money spent on inventory that will never generate revenue, rather than an artificial accounting adjustment.

Why is dead stock easy to miss in an Amazon FBA business specifically?

Inventory sitting in a fulfilment centre doesn’t present the same visible cue as damaged stock on a shelf would, so it requires actively reviewing aged inventory reports to catch, rather than being something you’d necessarily notice day to day.

Does Link My Books handle inventory write-offs automatically?

No. Link My Books focuses on accurately reconciling sales, fees, refunds, and tax from your settlements, giving you a reliable financial baseline, but inventory valuation and write-off decisions are a separate process typically managed alongside your accountant.

How often should I review inventory for potential write-offs?

Regularly, ideally as part of a routine inventory review rather than only at year-end, since dead stock that sits unaccounted for longer continues to distort your margin and inventory turnover figures the longer it goes unaddressed.

Accurate books give you the reliable foundation to spot problems like dead stock before they compound. Start a 14-day free trial with no card required and see your sales and fees reconciled accurately.

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