Task 1: Create a PayPal bank account

A PayPal bank account is required, against which you can record PayPal sales. This account will show you the balance owed to you by PayPal (or the balance you owe PayPal). It can be used like a normal bank account for making payments from or recording transfers to other accounts. Unfortunately at this stage, the PayPal account can't be set up with bank feeds.

1. Click your business name and choose AccountsGo to the Accounting menu and choose Chart of accounts.
2. Click Create account.
3. Leave the Account category set to Detail account.
4. For the Account type, choose Bank.
5. For the Parent header, choose the header account under which this new account will sit. If you're unsure which to choose, check with your accounting advisor.
6. Enter a Account number that suits your account list.
7. For the Account name, enter "PayPal Bank" or similar.
8. Select the applicable Tax code. If you're unsure which to choose, check with your accounting advisor.
9. Click Save.

Task 2: Create a PayPal clearing account

This account is required to temporarily hold the PayPal fees before being cleared to an expense account.

1. Click your business name Go to the Accounting menu and choose Accounts Chart of accounts.
2. Click Create account.
3. Leave the Account category set to Detail account.
4. For the Account type, choose Bank.
5. For the Parent header, choose the header account under which this new account will sit. If you're unsure which to choose, check with your accounting advisor.
6. Enter a Account number that suits your account list.
7. For the Account name, enter "PayPal Clearing" or similar.
8. Select the applicable Tax code. If you're unsure which to choose, check with your accounting advisor.
9. Click Save.

Task 3: Create an expense account for the PayPal fees

This account is required to record the PayPal fees as an expense to your business.

1. Click your business name Go to the Accounting menu and choose Accounts Chart of accounts.
2. Click Create account.
3. Leave the Account category set to Detail account.
4. For the Account type, choose Expense.
5. For the Parent header, choose the header account under which this new account will sit. If you're unsure which to choose, check with your accounting advisor.
6. Enter a Account number that suits your account list.
7. For the Account name, enter "Merchant Fees" or similar.
8. Select the applicable Tax code. If you're unsure which to choose, check with your accounting advisor.
9. Click Save.

Task 4: [Optional] Create a contact for the PayPal fees

When you record the PayPal fees using a spend money transaction, it's a good idea to allocate the transaction to a contact. Here's how to create a contact for PayPal.

1. Go to the Contacts menu and choose Create contact.
2. For the Contact type, select Supplier.
3. For the Designation, select Company.
4. In the Company name field, enter "PayPal" or similar.
5. Enter a Contact ID—this is a unique alphanumeric code to identify this supplier, such as SUP0001.
6. Click Save.

Task 5: Record the sale

Record the sale for the customer as you normally would (need a refresher?).

Task 6: Receive the payment

When payment for the sale is received it comprises the net payment you will receive for the sale, plus the PayPal fees. In our example the total sale is $100 which comprises a net sale value of $98 plus a $2 PayPal fee. This is recorded using a customer payment for the full amount to the PayPal clearing account, and then a receive money transaction for $98 to the PayPal account from the clearing account.

To record the payment for the sale

1. Go to the Sales menu and choose Invoice Create invoice payment.
2. In the Customer field, select the applicable customer. The list of invoices open against that customer appears.
3. In the Deposit into field, select the PayPal Clearing account you created earlier.
4. Enter a Description for the payment.
5. In the Amount received column, enter the full amount the customer paid (including fees).
6. Click Save.

To record the receive money transaction

1. Go to the Banking menu and choose Receive money.
2. In the Bank account field, choose the PayPal Bank account you created earlier.
3. In the Contact field, select the customer.
4. Enter a Description of transaction.
5. Select whether the amounts are Tax inclusive or Tax exclusive.
6. In the Account column, choose the PayPal Clearing account.
7. In the Amount field, enter the sale amount minus the PayPal fee.
8. Choose the applicable Tax code. If unsure, check with your accounting advisor or the ATO.
9. When you're done, click Record.

Task 7: Record the PayPal fees

You can now record the PayPal fees using a spend money transaction. This will clear the money from the PayPal Clearing account and allocate it to your PayPal Expense account.

1. Go to the Banking menu and choose Spend money.
2. In the Bank account field, choose your PayPal clearing account.
3. [Optional] In the Contact field, choose the PayPal contact.
4. Enter a Description of transaction.
5. Choose whether the transaction amounts are Tax inclusive or Tax exclusive.
6. In the Account column, choose the PayPal expense account.
7. In the Amount column, enter the PayPal fee.
8. Choose the applicable Tax code. If unsure, check with your accounting advisor or the ATO.
9. Click Record.

<h2><i class="fa fa-comments"></i>&nbsp;&nbsp;FAQs</h2><br>

Can I set up a bank feed on my PayPal account?

Currently you can't set up a bank feed directly from a PayPal account. But there are a few ways PayPal payments can be managed. One way is to link your PayPal account to a bank or credit card account. If you have a bank feed set up for that bank or credit card account, then all transactions, including the PayPal ones, will show in that bank feed.

For more information about PayPal payment methods, see the PayPal website.