2006balia - "which method of accounting is used for eBay business bookkeping where one has inventory and continuously buys inventory throughout the year?"
I wish you would ask this question using your selling account so one would have a better understanding of what you do.
In any case, if you expect to run a substantial full-time business, you should first consult a competent accountant familiar with the mail order business (that is what selling on eBay and online is all about) knowledgeable of your personal circumstances.
When it comes to calculation of your "cost of goods sold", you start with the inventory you had (at cost) at the beginning of the year, add purchases during the year, then subtract the inventory you have at the end of the year. The result will be your "cost of goods sold" for the year. Deduct that amount from your gross revenue for the year to arrive at your gross profit.
Finally, you deduct your business related expenses (fees, shipping supplies, postage, etc...) to arrive at your net profit.
Only the net profit needs to be reported for income tax purposes (line 135 of your tax return).
Several years ago I prepared a sample "profit and Loss Statement" for use by Canadian eBay sellers. Feel free to use it and modify it based on your needs:
http://pierrelebel.com/lists/P&L-sample.htm
Personally I never used computerized accounting system for my mail order business (eBay and website). I prepared several individual schedules for sales, purchases and expenses and completed my statement of income from that information. If you do not have the training to do that, let your accountant suggest what program is best for you in your circumstances.
"... paypal.... can split out the GST, PST collected..."
Are you GST/HST registered? "PST" what province do you sell from? Do all your sales get collected exclusively through PayPal?
