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deannaolson1
Level 1

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

I have sold a product online and charged a shipping fee.  When I create the invoice and the last line item is the shipping fee, I am not sure what account to assign this to.  Is this an income or an expense?  I, of course, have initially received this shipping fee from the customer, then I pay it out to the shipper when the order ships.
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Best answer December 10, 2018

Best Answers
Countrymusicmom
Level 2

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

The shipping is income and expense.

On your invoice set up your Shipping Charge Item and link it to an Income Account.

When you pay the shipper, set up a Shipping Expense Account and use that as your expense.


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7 Comments
Countrymusicmom
Level 2

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

The shipping is income and expense.

On your invoice set up your Shipping Charge Item and link it to an Income Account.

When you pay the shipper, set up a Shipping Expense Account and use that as your expense.


View solution in original post

deannaolson1
Level 1

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

THANK YOU KINDLY!!!
rmitche2
Level 1

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

I disagree. Shipping, as collected on an online sale, is no different than sales tax collected with a sale. That is, it is a liability that should not be included in the net from a sale. The shipping fee must be paid to the shipper (USPS,UPS,FedEx) when the goods are shipped to the customer, which, more often than not, is higher than calculated and collected from the online purchase. Otherwise, the total collected (including shipping) is subtracted from the COGS to show an inaccurate net from sale. The shipping fee needs to be ignored from net, not expensed.

jentxtx
Level 1

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

Thank you. How would you set that up?

 

Jennifer

Bookkeepingisfun
Level 2

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

Yes, we want to track both the shipping income AND the shipping expense. I prefer to isolate my shipping income, by creating a correlating income account called "delivery income" or "shipping income" ..then down under my COGS section, I will see my shipping costs. That way you will be able to see if you are making a profit on shipping, or if you are losing money on shipping.  

 

If you set up your customer invoice item to go only to an expense acct or COGS account, then what you are really doing is REDUCING your expenses or COGS totals on your Profit and Loss report. You actually can set up one item to cover both shipping purchases/expenses and shipping income by clicking the box that says "this item is used in assemblies or is a reimbursable charge". It sounds like you pay someone else to ship your products, and then funnel that cost onto the customer invoice to be reimbursed, so that is considered a "reimbursable charge". 

 

Once you click that box, you will see 2 options now, on the left, it will have you assigning a COGS account  to PURCHASE TRANSACTIONS, and then you assign an acct for SALES TRANSACTIONS, this is where you put in your Income Acct. 

 

Hope that helps! I tried to add screenshots to this but it wouldn't let me. Best of luck! 

 

 

Bookkeepingisfun
Level 2

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

Expenses relate to revenue, Liabilities relate to assets, and show up on your balance sheet. Liabilities do not show up on income stmt (profit and loss) Examples of liabilities, are your credit cards/loans, sales tax payable, payroll tax payable, garnishment payables, note payables.....  If you were to set up an invoice item to go to a liability account, it would pull the income and/or the COGS expense off your income stmt completely. 

Though it might seem logical that since you collect sales tax from your customer and then you pay that same amount to the state you live in, this is not the same at all. By law, you cannot markup your sales tax to make a profit, but you have every legal right to charge a shipping/handling fee based on the percentage of the total sale, or you can do direct shipping cost, for example, you paid $4.95 so you charge the customer $4.95. its a wash.  If you paid $4.95, and then you decided to charge the customer $6.00, you made a profit of $1.05. My point is liabilities are not the same as COGS whatsoever from an accounting tax standpoint.

JonSWR
Level 2

What account do you assign Shipping to when you shipped an order online and you have received payment for the shipping and handling charge? Is this an expense or income account?

What account do you all use for shipping income?

 

In the past, I set up Sales of Product Income > Shipping Income.

 

But I noticed there's a standard account for "Service/Fee Income." 

 

Ultimately, they're both income accounts, but is Service/Fee Income more appropriate for shipping income?

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