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How to account for transaction or merchant fees from Paypal, Stripe, and other payment gateways
How to account for transaction or merchant fees from Paypal, Stripe, and other payment gateways

PayPal fees, Stripe fees, wepay etc.

Yzza avatar
Written by Yzza
Updated over a week ago

Most credit card processors will deduct fees (merchant fees) from the original payment made by your customer. You end up only receiving the net amount (after fees) and that's what ends up in your Less Accounting account. To properly account for situations like this, you'll have to make some adjustments. Don't worry, we'll make it easy for you!

Sample Scenario:

You sent an invoice to your customer for $1,000 and they paid via PayPal. PayPal deducted a merchant fee, and only sent you a deposit of $950. Since your bank account is connected to Less Accounting, the transaction for $950 was imported automatically.

Total invoice amount: $1,000

Total payment: $1,000

Fees: $50

Net payment after fees: $950.

To correct this:

  1. Go-to Reports > Bank Reconciliation > PayPal> Choose the desired Financial Account and Reconciliation Period

  2. Open the deposit transaction that you wish to adjust. In this case, it's amounting to $950.

  3. Change the amount to $1000 so it reflects the total sale amount, apply to the appropriate invoice, and save.

  4. Add a new expense to represent the total fee deducted, in this case, $50. You would generally categorize this as Paypal Fees, or Bank Fees. (If you have several of these transactions in a reconciliation period, you can total them as one expense item.)

  5. Adjust the Total Expenses and Total Deposits for the period, but your beginning and ending balances will remain the same.
    Original Total Deposits + Fees adjusted = New Total Deposits
    Original Total Expenses + Fees adjusted = New Total Expenses
    If using Paypal, stick to the amounts shown in the Activity Summary page of your monthly statement. Just total all credits (+) for your Total Deposits, and total all debits (-) for your Total Expenses.

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