How do I do Etsy bookkeeping with income in USD and expenses in JPY?

Hi! The simplest way to get “real profit” when you’re paid in USD but spend mostly in JPY is to pick one home currency (usually JPY in Japan) and then record every sale/fee/expense in its original currency plus a JPY conversion using a consistent exchange-rate rule. The key is treating Etsy deposits as just a money transfer (USD → bank), while your actual income/expenses happen on the dates the sale and fees occur.

Here’s a clean approach that stays consistent and won’t drive you crazy:

1) Choose your “base currency” and your exchange-rate rule

Base currency: JPY (since your costs and day-to-day business reality are in JPY, and you’ll usually need JPY figures for tax reporting in Japan).

Exchange-rate rule (pick one and stick to it):

• Option A (best accuracy): Daily rate on transaction date (sale date for revenue, charge date for expenses/fees).
• Option B (simpler): Monthly average rate for revenue/expenses, and use actual rate for bank conversions. This is easier but less precise.

Whichever you pick, don’t mix methods mid-year unless you have a strong reason—consistency matters more than perfection.

2) Separate “what happened” from “how it was paid”

Think in layers:

• Sales/Revenue (USD on Etsy, JPY at events): Record when the order is placed/paid (or when you consider it earned).
• Etsy fees/Ads/shipping labels (often USD): Record when Etsy charges them.
• Deposits (USD → your bank): Record as a transfer, not income.
• FX differences: The change in exchange rate between (a) when you earned USD and (b) when it was converted/deposited is an FX gain/loss. This is what makes profit feel “different” month to month.

If you don’t track FX gains/losses separately, your profit will look “off” whenever USD/JPY moves.

3) What to track (works in a spreadsheet or software)

For each transaction, capture both currencies clearly:

Minimum columns (spreadsheet-friendly):

• Date
• Type (Etsy sale / Etsy fee / Ads / Shipping / Materials / Local event sale / Bank conversion, etc.)
• Description
• Original currency (USD or JPY)
• Original amount
• FX rate used (USD→JPY)
• Amount in JPY (calculated)
• Category (for your P&L)
• Payment source (Etsy Payment account, credit card, cash, etc.)

Then add one more section/table just for bank conversions:

• Date of deposit/conversion
• USD amount converted
• JPY received
• Implied FX rate (JPY received ÷ USD)
• Difference vs. the “book rate” value of those USD funds → this is your FX gain/loss

4) How to handle Etsy specifically (so your numbers tie out)

A common mistake is using Etsy deposits as “sales.” Don’t. Deposits are net of fees, refunds, and timing differences.

Instead:

• Use your Etsy order/export reports (gross sales, shipping collected, discounts) to book revenue.
• Use your Etsy fees/marketing/shipping label charges to book expenses.
• Treat the deposit as the movement of cash from Etsy to your bank.

This way your Etsy bookkeeping matches your shop performance, and your bank statement matches cash flow.

5) Spreadsheet vs accounting software (what I’d pick in your situation)

Spreadsheet is totally fine if you have:

• Lower order volume, and
• You’re OK updating rates and doing a monthly reconciliation.

Accounting software is worth it if:

• You have lots of orders, multiple payment methods/cards, or
• You want FX gains/losses handled more automatically, and easier reporting.

If you go software, look for multi-currency support and the ability to:

• Set JPY as the base currency
• Record USD transactions in USD
• Revalue foreign currency balances (so your USD sitting in Etsy/bank is valued correctly)
• Track FX gains/losses automatically

(If you tell me your approximate monthly order count and whether you use Payoneer/Wise/another service for USD deposits, I can suggest which setup is most painless.)

6) A simple monthly workflow that stays accurate

1. Export Etsy monthly data (orders + fees/ads/shipping labels).
2. Import/enter expenses paid in JPY (materials, packaging, local travel, event booth fees, etc.).
3. Convert USD transactions to JPY using your chosen rate rule.
4. Reconcile:
   • Etsy Payment account activity → matches your Etsy bookkeeping totals
   • Bank deposits → recorded as transfers/conversions
5. Book the FX gain/loss from conversions so your profit makes sense.

If you want, share (a) how you receive USD (bank, Payoneer, Wise, etc.) and (b) whether you want cash-basis or accrual-style tracking, and I’ll outline the exact accounts/categories to use and a spreadsheet template layout that fits your shop.