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Thread: Dealing with Stripe and PayPal as bank accounts (accounting software)

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    Moderator Kay is a Premium Member
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    Dealing with Stripe and PayPal as bank accounts (accounting software)

    I just want to run something by you to see if I'm thinking along the right lines. (It's been a while since I was well-versed in this kind of stuff.)

    If you're using Stripe and/or PayPal (as you probably will be if you're selling on Amazon and eBay), this is how you deal with it using accounting software:

    Add Stripe and PayPal as "bank accounts" in the accounting sytstem.

    Record the full amount of the deposits as "sales".

    When PayPal or Stripe pay out, transfer the funds from there into your bank account.

    Deduct the processing fees from the PP or Stripe accounts (ie the accounts in your system) and add them to a business expense account as a cost of sales.

    Is that right? I'm scratching my head because that's not how I would have done it. I would probably have kept the cost of sales (in this case the processing costs) out of the sales account. At the time of accounts preparation I would have shown the sales as a total. Then I would have listed an itemised cost of sales and deducted the total from the sales so my accounts would show turnover (ie money brought in by sales) less cost of sales, and then gross profit (subsequently deducting all the other expenses to get to the net).

    And if that's confusing, I can hardly wait until it's time to figure out how to deal with VAT etc.

    All these debits and credits are putting my head in a spin. How do people cope with all this?
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    Publishing Mentor dsieg58 is a Premium Member
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    If I'm reading your question right, (I use PayPal) I have gross sales accumulate in my account. I transfer money to my business account on a monthly basis. At the end of the year, I get a full year statement (I could get it monthly, I suppose, but I have no need to) which lists out all my expenses, fees, refunds, sales, deductions, etc., in one spreadsheet along with totals for each. I use that, along with my 1099-K as justification of all my figures.

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    Moderator Kay is a Premium Member
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    Yes, we're thinking along the same lines. Tot it all up and subtract the cost of sales at the end of the year/month.

    It's just that I saw the above advice elsewhere and I was thinking that it seemed odd to me to keep reducing the sales account with the cost of sales. I don't need to know this for myself, it's just that I'm seeing some conflicting advice around the Web. And one of these days someone is going to ask the same or a similar question on here. It would be good if we already knew the answers.
    British Expat - helping people to live and work abroad since the year 2000.

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