How should I represent my PayPal transactions in my bank account?

Hi john@socha.com,

To avoid doubling your income, you can exclude your PayPal transactions since they are reflected in your bank account that is connected to QuickBooks. Just manage the downloaded transactions.

Feel free to always go back to this thread if you have other questions in mind. Take care!

The main thing I'm asking about is for purchases I made with PayPal. The PayPal Bank accounts have all the details that make it easy to categorize my purchases. Same for the income. So I like being able to do the categorization there. The transfer of funds from PayPal to the bank showed up as a transfer, which makes sense. So I'm wondering if I mark the "deposit" into the PayPal Bank account as a transfer from Savings, and then in my savings, mark the "payment" to PayPal as a transfer to the PayPal Bank, if that will result in the correct totals everywhere, and correct accounting.

Good afternoon, @johnsl. 

Thanks for reaching back out to the Community. I'm so glad you gave us some additional information about your question. 

With the questions you're asking, an accounting professional would be the best person to consult with about this subject. An accountant will be able to give you advice that's helpful for your business. If you don't have one, no worries. Here's a link so you can find one near you: Find ProAdvisor. 

Since this was your first post/thread in the Community, cruise on over to our tutorials page to see more details about your QuickBooks Online account that will help you in the future. 

I hope this helps. Let me know what your accountant says. Should you need any further assistance, feel free to ask. I'm only a post away if you need me. Wishing you and your business continued success. 

I posted my question after asking my accountant. She knows accounting, but not how best to do this in QuickBooks Online. I also did multiple searches trying to understand the implications of the difference between classifying the bank entries as either payments or transfers, but wasn't able to find an article. So are you saying that I need to find a QBO account instead of my account to get help?

My accountant has been using QuickBooks (the desktop version) for well over a decade. But what isn't clear is the difference in how QBO will treat payments vs transfers differently between two "banks" in the same QBO account. I'm guessing is that marking the checking account PayPal transactions as Transfers to the PayPal Bank would be better than marking them as a payment to PayPal (a vendor not connected to my PayPal Bank in QBO). Is that correct?

I added a post rather than replying by mistake. Please see my latest.

Hello Johnsl -- I was reading your post and discussion with the quickbooks community. I noticed you seemed to always get the same "prompted" answer from them in regards to transfer. Did you ever find out the implications of recording it as a transfer or using the categorization "expense" feature?? I am struggling to get reconciled accounts with multiple accounts in my chart of account being linked to my paypal. Thanks for your input!

I'm trying to work on the Paypal issue as well.  People are telling Johns to record as a transfer from one bank account to another bank account.  .  I use QB Pro plus 20222 desktop (I don't like the online version). I have two checking accounts one that is titled ebay checking and the other (the bank name) checking.  Obviously I can tranfer from the main checking to ebay checking.  I use expense accounts to record the transactions and regular income accounts for any payments we receive via paypal.  The accout labeled ebay checking is linked directly to our ebay account and we use paypal for purchasing.  Paypal wants you to maintain money in the account and to have a backup credit card or bank account on file when your purchases or  customer refunds are higher than the funds in the paypal account.  The other day I had to "add funds" to the paypal account.  No problem, I just hit add funds and gave it the amount.  All done right?  Not exactly the funds transferred to the paypal account but the came out and went back into the same checking account.  The transaction recorded itself as a deposit.  Needless to say, I wanted it to show funds coming out of the ebay account and going to the Paypal account.  I had never set up a paypal account via the chart of accounts.  There wasn't a need.  Now, because the ebay account actually is used for all the paypal transactions, the whole thing only posted as a deposit.  Even if it had posted as a transfer and then the money going into paypal, in this instance it would have gong into the same checking account leaving 0.00 financial recording.  Like I said, I use the account called ebay checking for all the paypal transactions and this time, first time its ever happened, it pulled the transfer from its own account and posted the deposit.  Appears as a one sided entry and throws the account out of balance..  Long story short.  I set up another account and titled it Paypal account.  I set it up as a bank account because the funds that are transferred to the paypal account are an asset.  I plan on maintaining the transactions the same as before, through income and expense accounts.  Is this satisfactory or how should I handle the bookkeeping?

I have recorded it as a transfer in my Paypal account. It shows up in my checking account, but so does the same charge as an expense. Therefore, it makes it a double entry in my checking account.  How do I avoid the double entry?