[GNC] Buying with PayPal - how do I split the transaction?

[David Cousens]

Dave,

The different approaches with this mainly reflect different circumstances.

PayPal to some extent acts a bit like a bank so my first thought would be to
treat them the same as you would treat a bank account, but the appropriate way
to treat it depends on how you actually use your account with them.

If you maintain a positive balance in the Paypal account from which payments are
made to vendors then it is reasonable to treat a PayPal account as an asset
account of type bank as they are not extending credit to you. 

If they extend credit to you, i.e. they pay the vendors immediately and then you
pay out the balance owing to them at the end of the month, i.e. the account
balance is negative the majority of the time, then they are functioning more as
a credit provider and a Liability account is a more appropriate way to treat the
account.

I chose to treat my Paypal account as a liability account, more for historical
reasons than the current use of the account, but I could equally have treated it
as an asset account for my purposes ( All that does is reverse the debit and
credit entries to the relevant accounts), as I indicate in my reply to Michael.
The function for me is primarily to make reconciliation and matching to receipts
simpler.

You wouldn't necessarily need to raise an invoice to cover a payment to PayPal
just as you wouldn't when you pay off your credit card with a bank. 

The main purpose of Customers and Vendors and the business features around them
is to avoid having to maintain individual accounts receivable and accounts
payable accounts for each customer or vendor you interact with and to provide
the information to manage the credit that is extended to you by vendors and the
credit you extend to your customers and the effect it has on cash flow.

Hope this clarifies things a bit.

David


 

On Sat, 2022-12-10 at 18:25 +0000, Dr. David Kirkby wrote:
> On Sat, 10 Dec 2022 at 17:09, Chris Skudder <cskudder at earthlink.net> wrote:
> 
> >    When you BUY something using paypal, the SELLER pays their fees, not
> >    you.
> >    So recording a purchase for which you paid using paypal is no different
> >    than any other purchase:
> >    Debit: expense (or asset, if you're buying something that you'll
> >    recognize as an asset on your balance sheet)
> >    Credit: your paypal asset account if you carry a balance in it; or
> >    credit a credit card account if your paypal purchases pull money
> >    directly from a credit card.
> >    Chris
> > 
> 
> I'm intending to use the Vendors and Customers under the Business menu. Do
> I need to make two totally separate transactions (one bill, one invoice) to
> fund the PayPal account from the bank account, and the other for PayPal to
> pay the vendor? In which case, does PayPal need to be entered as a vendor
> so I can pay PayPal?
> 
> Sorry, I'm really confused, and it seems multiple people have different
> ways of doing this - most not using the Customer/Vendor facility.
> 
> Dave
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