Paypal is a great way to get paid from your clients. Especially if you aren’t set up to take credit cards. However recording the payments in QuickBooks is something I get asked about a lot.
If you invoice your clients out of QuickBooks:
1. In the Chart of Accounts set up an expense called “Paypal processing fee”.
2. When you receive the payment, enter in the amount that Paypal gives you. This will leave an unpaid balance that is the same as the Paypal Fee.
3. “Write Off” the balance to the expense account “Paypal processing fee”.
If you don’t invoice your clients out of QuickBooks:
1. In the chart of accounts set up a bank account called “Paypal”
2. Also in the chart of accounts set up an expense account called “Paypal processing fees”.
3. Record the deposit like you would in any other bank account. Record the full client payment amount. The next transactions in the paypal register is the paypal processing fee, which gets coded to the “paypal processing fee” account you just created.
4. Lastly do a transfer from the paypal bank account to your checking account.
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