How to Account for PayPal Fees

A common task for firms that use PayPal is accounting for PayPal's fees.  When PayPal makes a deposit, it is net of PayPal's fees.  What you charged the customer on your invoice is not what you actually receive to your account.

This walkthrough will show you how to split that deposit transaction to account for PayPal's fee and have a deposit transaction to match to your invoice if you wish.

In this example, you have charged your customer $5000 dollars and PayPal has kept $100 for their fee and deposited $4900 to your account.

Follow these steps to split the PayPal deposit:

1. Click Banking from the top menu and select the bank account on the left side where you will find the PayPal transaction. 

2. Find the row of the PayPal transaction. Mouse over the three ellipses on the far right to view the menu and select Split.

3.  Where you see the option to Add a row, change the number from 1 to 2 and select Apply. This should add a second row for you to manage the split.  


4. Adjust one row to the amount you charged your customer.  For this example, the transaction is showing as $200 but you originally charged your customer $215.00. So you would change the amount in the first row to $215.00.

Note: This number should be positive.  You'll get to reconcile this amount to an invoice if desired at the end.

Adjust the second row to the amount that PayPal deducted.  

Note: PayPal's fee should be a negative, so input "-$15.00" in the second row.



5.  Use the dropdown arrow under the account column to open the general ledger. Choose Expense from the dark grey column to view only the expense category options. Select your desired category. For example, you could use "Bank Charges"  or click Add GL Account at the bottom to create your own account to keep track of your PayPal fees specifically.

6.  Click Confirm Split at the bottom to save your changes. You will be redirected to the banking transactions page. 


7. You now have the two split transactions visible on the banking tab with the split icon visible to the left of each row.  Click the line item to see the expanded view.

Note: The drop down at the top of the transaction list allows you to view your transactions with or without splits being visible. To view split transactions, make sure this is set to Originals and Splits. 

Optional:  Use Apply to Receivable to match the deposit to your invoice. You will find this option by mousing over the 3 ellipses on the far right of the transaction line item.