QuickBooks and PayPal

For over a year, I've been trying to figure out how to properly record PayPal fees in QuickBooks so that invoices are shown as paid in full while having deposits match my bank statement and PayPal fees recorded as expenses. I've actually avoided taking care of my bookkeeping in total exasperation. Today, at long last, I've learned how to do this. In case you're having a similar problem, here's what the folks at QuickBooks taught me today...

1. Create an expense account for PayPal fees if you don't have one already.

2. Receive your payment for the full amount if you have an invoice created for the transaction.

3. When recording the deposit, create an entry for the PayPal fee using the expense account you created. Enter the amount as a negative so that it's subtracted from the actual payment amount.

You don't have to have an invoice. You can just record the payment on the deposit screen, skipping #2 above.

Here's an example:

A customer purchases an item at a total cost of $30. The PayPal fee is $1.17. Your deposit record would look something like this:

If you pay for shipping before you transfer the payment to your bank account, you can also enter the shipping cost as another entry on the deposit screen using an expense account for shipping.