PayPal processes transactions that represent credits and debits, which increase or decrease the PayPal bank balance. These transactions are categorized by PayPal for better organization.
This article will focus on the transactions included in the PayPal Movement category and guide you in selecting the appropriate general ledger account and tax rate in your connected accounting ledger.
Understanding the PayPal Movement Category
The PayPal Movement section in the Accounts and Taxes screen lists all PayPal accounts (organized by currency symbol) that have experienced a net increase or decrease at the end of the daily statement period.
Choosing the general ledger account
Your PayPal Movements will need to be mapped to a GL account. You can either:
Use A2X's Auto Setup and allow A2X to create this account, or
Choose your own account from your connected accounting ledger.
If using A2X Auto Setup, A2X will create an account called PayPal Bank Movement in the connected ledger. The account type associated with this auto-setup account is 'current asset'.
If you have more than one PayPal bank account to reconcile, it is strongly recommended to create and use your own accounts instead of relying on the A2X Auto Setup account. This approach allows for better organization and reconciliation of multiple accounts.
Please refer to this article to learn more about how to set up these accounts, and transfer any balance, if relevant from the legacy PayPal account.
Reconciling the general ledger account
The ending balance of each PayPal account should match the ending balance by currency as shown in the PayPal portal or the PayPal monthly statement.
It is recommended to create a separate PayPal general ledger account for each PayPal Fx Currency.
It is not advisable to map all PayPal movement currencies to the same PayPal account in the connected accounting ledger, as it won't be easy to reconcile and match each PayPal currency balance to the PayPal statement if all balances are consolidated.
Please refer below to an example of how the PayPal Movement category within Accounts and Taxes should be mapped.
Choosing the Tax Rate
In most cases, the tax rate for all accounts in this category should be 'No Tax'.
However, we strongly recommend you consult your accountant or relevant tax authority to confirm whether sales tax applies to transactions in this category.