PayPal processes transactions as credits and debits, which increase or decrease the PayPal bank balance. These transactions are organized into categories by PayPal.

This article provides examples of transactions in the Transfers category and offers guidance on selecting the appropriate general ledger account and tax rate in your connected accounting ledger.

The Transfers category in PayPal records all transfers made between different foreign currency PayPal accounts.

Each time a transfer is made, there are two currencies transacted, and therefore two statement rows will be created. The funds will be transferred from one currency to the other using two PayPal foreign exchange spot rates - the first is to sell the currency being transferred to the other wallet, and the second is to buy the currency being transferred to the other wallet.

Each transfer line within A2X's PayPal Daily Summary can be easily matched with the other side.

Example one - two currencies:

In the below USD statement example, $1,092.30 USD has been transferred to the GBP account. The statement row identifies both the 'from' and the 'to' currency within the transfer pair.

The GBP statement shows the amount of $833.22 that was deposited in the GBP account.

A2X recommends that you map both of these statement lines to the same ledger account. Your nominated ledger will use the spot rate it reads on the day to translate both sides to the ledger's home currency.

Example two - many currencies:

In the below example, we have many currencies in use. The highlighted amounts illustrate the amount transferred out of USD, to GBP in both source and home currency.

The home currency in the below image is AUD.

The debit and credit to the AUD running balance are not the same. This is because there is a cost of exchanging foreign currencies. In this example that cost was $1,641.92 - $1,588.47 = $53.45. The total cost of all currency transfers on this day was $125.14.
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It is important to ensure that the number of postings to this account each day is an even number, as there are always two entries posted to represent the "from" and "to" accounts. In addition, you should check the ending balance to ensure it is a balance that appears reasonable, given the cost of transferring currency.

When you are satisfied that the ending balance represents the cost of transferring funds, it is recommended that this balance be moved by general journal entry to an income statement account such as 'Foreign currency gain/loss'.

If using A2X Auto-Setup, A2X will create an account called PayPal Currency Conversion in the connected ledger. The account type associated with this Auto-Setup account is 'current asset'.
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You have the choice of using Auto Setup and allowing A2X to create this account, or choosing your own account from your connected accounting ledger.

It is recommended that you use the same account for all general ledger accounts in the Transfers category, as this account needs to be used for the debit and credit that result in each paired transaction.
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The account can be a current asset account or an expense account.

If you use a current asset account for Transfers, the balance of this account will need to be transferred (by raising an adjusting journal entry) to an expense account (such as Foreign currency gain or loss) at month-end. This expense represents the margin charged by PayPal to convert currencies.

The ending balance of the current asset account should be zero at each month-end after you have posted the month-end journal to move the balance to an expense.

In most cases a 'No Tax Rate' is applicable for the Transfers category. We recommend you to check with your accountant or relevant tax authority to determine if sales tax is relevant to this transaction category.