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How to register invoice payment with PayPal fees?

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Matt Taylor

I am registering invoice payments received through PayPal. After registering the payment, I add a journal entry to record the PayPal fee:

  • Credit asset account "PayPal" $12.99
  • Debit expense account "Bank Service Charges" $12.99

Is this the best way? I usually forget to add the extra journal entry.

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Matt Taylor
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Option 2: Make a journal entry at the end of the month for the total of all fees. Problem is my PayPal balance is always overstated.

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Do not register the payment from the invoice because it will not allow you to do this. Instead, go to Customer Payments, create a new one, specify the net amount you got at the top and select the invoice in the list below. Then the system will ask you what to do with the remaining and you can select a "banking fee" or "transaction fee" account.

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Matt Taylor
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It looks like this works, but it took me a couple of tries to get it right. The customer was invoiced for $150. In the "Paid Amount" field at the top, I entered 145.35. In the "Credits" list, for the appropriate invoice, I changed the "Allocation" field from 145.35 to 150.00. This makes the "Difference Amount", at the bottom, -4.65. I entered "Reconcile Payment Balance" in the "Payment Difference" field. I entered my "604000 Bank Service Charges" account in the "Counterpart Account" field. I changed the comment from "Write-Off" to "PayPal Fee". Save and Validate, and it works.