Automatically Record Credit Card or Merchant FeesĪ much easier way to account for merchant fees is to use an integration or connector app like Bookkeep. You can see how this can be quite time consuming, especially if you are using multiple payment processors. You’ll likely end up having to export the transaction in order to get the fees, then enter them manually into QuickBooks or other accounting systems you are using. To do this manually, you’ll need to login into each one of your payment provider(s) to get the fees from them. You’re then left with the net amount and have to account for this merchant fee. How to record a journal entry for credit card fees.Ĭredit card processors usually deduct merchant fees from the original payment made by your customer. However, since merchant fees are directly related to sales, the monthly figure can vary each month along with your sales, making it far harder to determine if they’re out of line when they’re in the expense section. Direct costs refer to all costs that relate directly to the production or purchase of the product. Cost of Goods Sold (COGS) are the direct costs incurred from selling products or services, while Operating Expenses (OpEx) refers to indirect costs. There are two types of cost included in COGS: direct cost and indirect cost. The policies are designed to protect the company and employees from anything adverse that might happen. Financial accounts are harder to manipulate with this method, and an accurate picture of the companys finances is given. As for the Expense account field, we could use the Cost of Goods Sold account. Add the Income account (mapped for Schedule F). Select the asset account under Inventory asset account. The agreement is that, as the policyholder, the company pays premiums on the policies. Fill out the needed information for the feed. When you scan your income statements month to month, you’ll be able to spot any unexpected patterns easily. Insurance expense is the charge that a company takes on for the insurance policy or policies it wants to protect itself and its workers. Rent, phone, internet, electricity expenses generally are the same each month. This is an acceptable way to handle fees, too, but it can get lost amongst all the other expenses when you look at your monthly income statement. If you count these fees as an expense, they will be grouped in with your operating expenses such as rent, electricity, phone service, etc. By doing it this way, you’ll always be reminded to check how much you are being charged and find ways to lower this huge cost, which is usually a percentage of sales. It’s good practice to place these fees at the top of your income statement, so they do not get lost with the rest of your monthly fixed expenses. Since you will not incur card fees if you have no sales, it makes sense to consider these fees as a cost of sales and include them in your gross margin. Carriage inwards is the shipping and handling costs incurred by a company that is receiving goods from suppliers. Income – Cost of Goods Sold – Credit Card Fees = Gross Profit. Carriage refers to the cost of transporting goods into a business from a supplier, as well as the cost of transporting goods from a business to its customers.This means the fees will be deducted to arrive at your gross margin. Treating the fees as a cost of sales (also known as the cost of goods sold) would put them at the top section of your income statement. Get your FREE Freight and Shipping Ebook Guide.There are two methods to consider when accounting for credit card processing fees or merchant fees: either as a cost of sales (or COGS) or as an operating expense. For more information about COGS, you can look online at the IRS Tax Guide for Small Business.Ĭontact bookskeep today for more information on ecommerce bookkeeping and accounting. InventoryLab makes it easy to track COGS and Expenses. Typically there is an expense account in the Cost of Sales section of your Profit and Loss Statement for shipping and it is used in this situation. This expense of shipping to the customer is directly related to the sale of the product, so we include it in the Cost of Sales section and include it in the gross profit calculation. Whenever you pay for shipping out to your customer, this is not included in COGS but is a monthly expense. “Freight in” is defined in the IRS Tax Guide for Small Business as “Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of the cost of goods sold.” Click HERE to get FREE Freight and Shipping Ebook Guide If you are shipping a product from your manufacturer to yourself, your prep center, or Amazon, this is considered “freight in” and can be included in your calculation for Inventory and COGS. When you are calculating the cost of your products, how do you handle the freight? Is it included in your cost of goods sold calculation? Or do you pay it from an expense account designated for freight or shipping? Luckily, the IRS rules are pretty clear in this area.
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