Many thanks, Diane.
I was able to accurately reconcile both PayPal and our checking account
monthly using the old method as I would post each transaction from the
respective statement. It worked until we started getting payments from a
3rd-party servicer. Then I end up with a overpayment or a short fall
depending on what happened at an event.
That meant tightening things up a lot ... a good thing ... We now have
more entries but much better information.
Tom
------ Original Message ------
From: "Diane Trefethen" <[email protected]>
To: [email protected]
Sent: 12/8/2018 2:50:51 PM
Subject: Re: [GNC] How to Reclassify Invoice Amounts
Unless I misunderstand your situation, you are a small business, do things pretty
simply, and do not have a large accounting dept. If this is so, then you don’t need
to reclassify anything. The total billed for your service(s) is Sales and all the
“various expenses related to the transaction” are booked as expenses when you enter
the bills from YOUR vendor(s), if you are on the accrual basis, or when you pay
your bills, if you are on the cash basis. [Side note: One thing you said worries
me. “Before I started keeping track of sales by invoice I would just splt the
transaction.” IF you “split the transaction” by breaking the invoice total down
into income, fees, shipping, etc, what did you book when you paid your bills for
those items? Take PayPal. If you used to book $1.75 of the invoice as PayPal
Expenses AND you booked your bills from PayPal as PayPal Expenses, then you booked
each PayPal fee twice. This would badly distort your P&L statement because you
would be showing less revenue than you were actually receiving and more
expenditures than you actually incurred.]
Be forewarned that Adrien’s additional GL posts like
Dr. Expenses:Insurance $192.15
Cr. Assets:Current Assets:Checking $192.15
are a mistake if you book insurance, PayPal, and other expenses when you enter
or pay the bills for those items. Doing it a second time will a) throw your
checking account out of balance and b) double book your expenses which the IRS
will NOT be happy about.
There is a misconception that accounting programs can do everything. They
can’t. There are many things that are better tracked separately using
spreadsheets and then booked into the accounting program with end-of-month GL
entries, like pre-paid insurance and accrued interest, for example.
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