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Payment of invoices by PayPal

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Duy Thai Posted: Sat, Jun 27 2009 11:23 PM
For a foreign client, I agreed to accept payment by PayPal. How should I account for the fee PayPal deducts for the transaction? If I do an "Add Transaction: Payment" in the amount I actually receive from PayPal, it wouldn't match the invoice. If I do the "Add Transaction: Payment" in the full (pre-fee) amount, it wouldn't match the deposit that actually shows up in my checking account statement. And of course, I want to make sure the PayPal fee goes into my GL expense account for "bank fees." PayPal does not separate out the fee as its own line item. They just "shave" the payment. I'd rather not set up a separate Account Register account for PayPal, as I don't expect to use this very often and plan to transfer any funds there to my checking account immediately, but maybe this is the only way. Thank you in advance for your suggestions.
Duy Thai San Francisco TM/BM+
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Probably the simplest way to do this and to properly account for the fees, is to add the payment for the full amount and then add a separate transaction to your General ledger to account for the fees. The downside to this is that you will have to net the two amounts when you do your bank reconciliation.

If this is an issue or concern then I would suggest the following:
1. enter the payment for the net amount
2. enter a write off for the paypal fee - this will pay off the balance
3. enter a journal entry for the paypal fee - Credit Income and Debit Bank Fees


Caren Schwartz (Moderator/CIC)

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Duy Thai replied on Wed, Jul 1 2009 10:48 PM
Thanks, Caren, for your always helpful suggestion. I was wondering if I could just enter a unprinted "check" in my checking account for the shaved fee. That way, both the deposit entry and the fee show on my Account Register, and I could enter a memo in both to net them together in reconciling the bank account.

On a related note, the Account Register can seemingly record an outflow only as a "check" or a "withdrawal" (which does not have a payee). When I make payments by wire transfer, I've been entering unprinted checks. I'm just hoping all these check no. 0's aren't gumming anything else up.
Duy Thai San Francisco TM/BM+
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