Best way to do bookkeeping for Ebay / Paypal business

[mainstreamcycle]

My accountant is constantly on my case about the massive transactional content in doing my books.   Yearly about 5000 transactions take place in Paypal  which are downloaded and then manipulated  into his custom spreadsheets - taking many many hours of work..... taking account of all the important aspects of each transaction ( buyer address, shipping costs, foreign currency, input tax credits, sales taxes, foreign exchange,  bank transfers, etc ...etc...).      I have told him a few times than I am a minor seller , and there must be a simpler way or faster way than what he employs because sellers are doing 10x my volume and would be buried in a month in admin work.  So, with my accountant ready to respond, I will ask anyone to engage us with your knowledge on this.

[pierrelebel]

I am not sure I understand the problem.  Why use your PayPal transactions?

5,000 transactions a year is no big deal.  Since you are GST/HST registered, you are required to provide invoices/receipts to your Canadian buyers.

If you print invoices for your buyers and produce them with any software program ("Simply Accounting" comes to mind), it is an easy task to add up the sales numbers, determine the rate of tax payable based on residence of buyer.  You do need that information for your GST/HST report.

The same information can be used for accounting and income tax reporting purposes.

Since you price your products in Canadian dollars, you do not have to deal with foreign exchange conversion. If you had, you could use the annual rate published by the Bank of Canada. 

An alternative to using a basic automated bookkeeping system generating your invoices and keeping track of your revenues/expenses, you can generate your invoices manually and simply keep track of your transactions on a daily or wekly basis.

5,000 a year means an average of 14 enties a day.  It can easily be done in a few minutes, every day.  At the end of the month, just add up the columns. 

[mainstreamcycle]

I will pass it along to him.  Not sure he will reply to that.

Paypal is the bank.  Proof of every tranaction is required in accounting, and the proof is in the banking records (paypal).  You are suggesting single entry accounting I think, which is unacceptable to my C.A./C.M.A

It appears Dipmicro and my guy are doing similar things.....I will pass all info along anyways.  thanks

[pierrelebel]

"Proof of every tranaction is required in accounting, and the proof is in the banking records (paypal)."

Actually, the "proof" of a transaction is the copy of the invoice sent to the buyer - or the bookkeeping entry representing such transaction.

"You are suggesting single entry accounting"

No - I am looking at typical double entry, the standard of moden bookkeeping. That is the system used by all computerized systems (an invoice to a buyer is offset by a receivable - later offset against payment and eventually receipt in bank account - each entry requiring a credit and debit in the trial balance).

From a bookkeeping perspective, PayPal does not represent sales (revenues) but payment of receivables.  To go into each PayPal transaction to determine the GST/HST status of each transaction seems like a lot of unnecessary and avoidable work to me.

If you are audited by CRA, they will first look into sales records ( copies of invoices to buyers to determine GST/HST taxability), then receipts (PayPal) then bank records to confirm receipts.  Next will be purchases and expenses (invoices from suppliers, monthly copies of bank statements or credit card statements showing payments.  Finally, they match your purchases to sales to determine gross margins - increase or decrease in inventory available for sale -  and eventually net profit.

Like many other eBay sellers, been there done that.  Not pleasant. 😞

[mainstreamcycle]

Thanks Pierre for that info.   I hope to have the C.A.  add to this soon. I think my C.A is relying on Paypal logs, but they need a lot of  manipulation  and editing to be useful to him.

[pierrelebel]

How do you file your GST/HST report?  Do you prepare them or is the work done by your accountant? Annually or quarterly?

[mainstreamcycle]

I appreciate the help,  but we are off track already.    Im really trying to gather and present to my accountant  better ways of using and extracting the required data from Paypal to  Excel.....The post from dipmicro below is to the point of what I was asking.   Getting the HST ITC paid on domestic shipping labels  efficiently from Paypal is not possible  without a formula/system that he has apparently created.  My guy will be interested in reading that.   Ill get to  his other 'beefs'  soon....