Reconciling Paypal account in QuickBooks is similar to reconciling a bank or credit card account in QuickBooks. You want to ensure that your beginning balance in QuickBooks matches the beginning balance for the period you are reconciling, and subsequently selecting the period end date then checking off the transactions that are on Paypal transaction printout with its corresponding transaction in QuickBooks.
Manually Entering or Downloading Transactions in QuickBooks Prior to Reconciliation
Depending on the number of transactions you have in Paypal and how you want to track them, will be the deciding factor on the method you use. I have a few clients that need each Paypal transaction to be entered individually because each transaction can be for something different. In this case, I have to produce a Sales Receipt for each one and apply the money to the correct item. I then make a deposit using the Undeposited Funds account just like I would any other deposits.
The one difference is that when you have selected all the items that you are depositing you then need to subtract the total Paypal fees. These should not be subtracted from each person/entity you received funds from because you need to show that you received the full amount of the money. Therefore, on the Make Deposit screen I use the next available empty row to add the Paypal fees. If you have an account that you are using specifically for tracking these, then that account will be used in the From Account column.
In the Memo field you can enter Paypal Fees if you would like, and you can insert “PP” for Paypal in the “Payment Method” field. The key to this working is when you enter the cost for the fees in the “Amount” column, they need to be entered as negative numbers. The total deposit should equal the amount that was transferred from PayPal into your bank account. This way the full cost of whatever was purchased will show in their proper accounts and the proper Expense account will be increased by the Paypal Fees.
If you usually have a lot of transactions for Paypal, you may choose to use Simple Port to import your Paypal transactions to QuickBooks. Once you have set the PayPal download to the correct format you will never have to do it again, and when it is configured correctly, Simple Port imports each transaction as a sales receipt, makes the deposit, and records the PayPal fees. The setup process can be a bit daunting, but they do offer free phone help and support and once they are through, your settings will be perfect and you won’t need to change them again. It has helped me tremendously with clients that have hundreds of Paypal transactions to contend with. Within 30 minutes, I usually get about 600 PayPal transactions into QuickBooks if I have to separate by sales tax jurisdiction, and less than 10 minutes if sales tax is not an issue.
Reconciling Paypal Account With QuickBooks
Now, all you have to do is go to Banking, Reconcile, select the Paypal Account from the dropdown menu, insert the period end date, ending balance and click Ok. Check off each transaction on the statement with its corresponding transaction in QuickBooks. When you are through, the difference at the bottom of the reconcile window should be $0.00. If it is not, then you will need to locate the discrepancy. If you do not see the transactions in QuickBooks, even though they are on the Paypal printout, you will need to manually enter them.
Conversely, if there are transactions in QuickBooks for the period you are reconciling but not on the Paypal printout, you will need to query them and delete or transfer them to the account for which they belong. This can sometimes occur when the download/import is not the option used to enter transactions in QuickBooks.
Note: To get the Paypal report that includes Paypal fees as well as a running balance, go to Activity, Activity (including balance & fees), and run a report for the period.
How to Download Paypal Transactions to QuickBooks
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