Small Business Accounting 3 Users, 1 Year online subscription Intuit QuickBooks Online For Mac 2018 Small Business Accounting *Important Note: This is not old desktop version, it is a online version that you can run under Mac OS.
My first blog post I want to write involves a simple topic but is actually quite common: How should you treat a PayPal account in QuickBooks? Answer: As a bank account. Many clients that I have had disregarded PayPal entirely on their chart of accounts and instead believe it is merely a vehicle for your funds to flow to and from your other (more brick-&-mortar) bank accounts.
However, when I’m running through to do the bank reconciliations, I’ll see both payments in and payments out with PayPal in the memo line. Since I don’t like to have PayPal as a true “Vendor” or “Customer” (you’re not actually selling or receiving funds to/from PayPal directly), having it as a bank account allows you to have the true Vendor or Customer listed in your accounting software. Also you would be surprised at how often, upon further review, that a balance still exists in these PayPal accounts! The clients have usually forgotten that it even existed in the first place, which also usually means that the revenue was never counted on your financial statements. Under-reported revenue is no laughing matter to the IRS. Having PayPal as its own bank account also allows you to track transfer fees in QuickBooks; PayPal is convenient but a business account is not cheap by any means for businesses to have.
For clients who elect to receive payments through PayPal for services on their website and use QuickBooks should look into the Intuit Payment Network–payments are handled similarly and you should see lower fees on each transaction. Follow up question: So I have PayPal as a bank account, does that mean I have to reconcile it every month? For your financial statements to be credible, all of your bank accounts must be reconciled at the end of each period. This is where many clients struggle as their business PayPal accounts don’t allow you to have true “Monthly Account Statements;” ironically enough many personal PayPal accounts do in fact have “Monthly Account Statements” available. Clients with business PayPal accounts still can receive monthly statements or summaries, but they just have a different name. To access your PayPal statement in a business account, log in and head to “My Account” then “History” then “Reports.” Click on “Monthly Financial Summary” to see an overview of your beginning balance, funds in, funds out, any fees paid and ending balance. For a full breakdown on each type of transaction, click the hyperlinks on each dollar amount available on the statement; I recommend saving the PDF version of each of your statements for faster review in the future.
You will find out right away that trying to download PayPal statements is very time consuming so it is something I do not like doing more than once per statement period. Once you have the proper documents on hand, it is easy to reconcile your PayPal bank account and enter in any missing transactions. 2nd Follow up question: How do I record a transfer from my PayPal account to my bank account? Answer: As a “Transfer.” QuickBooks allows a transfer between balance sheet accounts without having to use the general journal. To make a transfer, go to “Banking” and then “Transfer Funds.” Choose the correct date, amount, the PayPal account as the “From” and your bank account as the “To;” hit “Save” and you’re ready to roll.
That was easy! 3rd follow up question: How I do record payments out of my PayPal account to my vendors? Answer: Several ways – You can use the “Vendors Pay Bills” option and also the “Banking Write Checks” option, depending on if you’ve entered the bill previously or not. If you’ve already entered the bill in QuickBooks before sending the payment (always recommended), then you should use the “Pay Bills” option. Simply select the PayPal account in the lower right hand corner instead of your other bank account and you’re ready to go.
It will ask you about your check number, for PayPal it doesn’t matter but you can also just use the letters “EFT” too. If you haven’t entered the bill yet, you can use the “Write Checks” function instead.
Just enter all the information about the correct vendor, account, amount, class, etc then hit “Save.” Just remember to choose the PayPal account as your bank account in the upper left hand corner and it will process automatically. This is also the spot to enter in any transfer fees not accounted for in QuickBooks but found on your statement. Final follow up question: What if I pay with funds either fully or partially from my bank account or credit card account through PayPal? Answer: Record it as a payment from PayPal as the full amount of the transaction (regardless if you only used a partial PayPal balance or not), then use the “Transfer” method described above to move funds from either your bank or credit card account to the PayPal account.
This will result in a temporary negative balance in your PayPal books, which is both normal and OK. PayPal is loaning you the funds to finish your transaction expecting to get paid later.
Only if your bank/credit card doesn’t have sufficient funds will it cancel your transaction and payment. Finally, a PayPal “Bill Me Later” account and the transactions purchased using that account is technically a credit card account.
Maybe I’ll cover that process down the line:). I am a new business owner, and after a year in practice, I deperately needed someone to organize my QuickBooks and prepare them for taxes. They were a mess! Jeff has been extraordinary in his work; I was amazed at what he accomplished and how quickly. He is thorough with his evaluation and extremely responsive should I have questions or concerns about anything. I am extremely lucky to have him now a part of my team. I look forward to continuing our work together!