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

[Dr. David Kirkby]

On Sun, 11 Dec 2022 at 01:28, David Cousens <davidcousens49 at gmail.com>
wrote:

>
> Dave,
>
> The different approaches with this mainly reflect different circumstances.


Yes, I can see that.

>
> 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.


I do not have any credit facilities with PayPal. I have in the past
withdrawn funds immediately. However, I am likely to stop this and maintain
positive balances for USD and Euro because I make the occasional sales in
USD and Euros, and frequently buy in those currencies. Keeping positive
balances will reduce currency conversion fees. So I would definitely
consider PayPal an asset, not a liability.


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.


That’s not the case with me.

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.



Okay, so if I think the following is a reasonable way to transfer money
from the bank account to pay for goods with PayPal, with PayPal configured
as an asset

1) Open bank account in GnuCash
2) Perform a transfer between the two assets
Debit account: Assets -> PayPal > GBP
Credit account: Assets -> Bank account

>
> 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.


We are required here to keep records of “who you bought and sold to (unless
you run a retail business)”

https://www.gov.uk/running-a-limited-company/company-and-accounting-records

I believe that my accountant told me that should be name and address. For
me at least, having everyone as a vendor or customer makes some sense and
consistently, but I think a transfer between the two assets makes more
sense for transfers between PayPal and the bank account.

Hope this clarifies things a bit.


Yes, it is becoming clearer.


> David


Dave
-- 
Dr. David Kirkby,
Kirkby Microwave Ltd,
drkirkby at kirkbymicrowave.co.uk
https://www.kirkbymicrowave.co.uk/
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