Reconciling a Paypal Account

If you are constantly using a Paypal payment account to transact both payments from customers and payments to vendors, then you should be treating your Paypal payment account just like a typical bank account in your bookkeeping files. I would recommend that you complete a reconciliation of this account at least on a monthly basis in this scenario.

The method to reconcile a Paypal account in your bookkeeping should be accomplished by using a detailed transaction or activity report. Even if you have Paypal connected via a bank feeds function to your Bookkeeping platform, you should still be handling this monthly reconciliation just like for a typical bank account.

If you do NOT have Paypal connected via a bank feeds connection to your bookkeeping platform, then the manual entry and reconciliation process can be a bit tricky for the following reasons:

• Currency Conversions – Paypal will make special entries to temporarily recognize both the dollar and foreign currency amounts of a foreign transaction, but then will make yet another entry to back out or cancel out the dollar value of this transaction; so there are always three transactions for one foreign currency transaction.
• Paypal Fees – One major difference between a Paypal account and a typical bank account is that Paypal will typically subtract merchant processing fees from all customer payments (sales) received, for EACH transaction. So there is always a gross amount and a net amount listed for each sales transaction in your list of transactions.
• Titles of Transactions – Express Checkout Payments (sales) and Payment Refunds (to customers) are simple to understand by looking at your transactions list, however the transaction title of “General Payment” usually indicates a payment to a vendor, however sometimes these are also refunds to customers as well, so be sure to review other columns of your Paypal data to ensure the actual purpose of your General Payments.

If you do NOT have Paypal connected via a bank feeds connection to your bookkeeping platform, then here are some time-saving tricks you can employ to make the monthly entries and reconciliation process of your Paypal account more efficient:

• Add up all of your Paypal fees listed for the month, and then make one end-of-month summary entry in your bookkeeping platform to recognize these fees for the month.
• Download your entire month’s Paypal activity onto a spreadsheet. If you do this, then you can proceed to hide all of the rows and columns of data that, either you have no use for, or are already entered into your bookkeeping platform for the month. This process is very useful so as to not become confused by all of the data present on a typical monthly Paypal activity download. However, BEFORE you start this process of hiding rows and columns, be sure to jot down the actual ending Paypal balance for the month, as listed on this spreadsheet.
• If you don’t want to list every single Paypal sales transaction in your Bookkeeping platform, then simply add up all of the Gross sales for the month and, just like you did for the Paypal fees, just make one end-of-month summary entry in your bookkeeping platform. Note: be sure to not confuse your Gross sales versus your Net sales listed.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.