In business, it’s important to keep a record of every purchase and sale you make. Using PayPal is no different, but when the transactions show up on your statement, there’s often very little to refer to.
To keep things simple, it makes sense to record your PayPal account as a separate account to that of your business bank account.
Recording PayPal transactions
When recording PayPal transactions, you need to record the date of the transaction, item description, transaction number and amount of the transaction. The simplest way to record them is to create a spreadsheet and use a different page/tab for each month of the year.
Create two versions of the spreadsheet, use one for sales (incomings) and one for purchases (outgoings). These will then enable your accountant to make sure the right information is filled in on the right forms for your HMRC self assessment tax return.
Making a PayPal Spreadsheet
On the incomings spreadsheet include:
- Date of Transaction – Helps you match transactions to goods sold/received.
- Description of products/services – Always start with online sale/EBay sale or something that will signify that it has been a PayPal transaction.
- Transaction number – PayPal’s unique number for this sale.
- Order total
- Grand total – This is the total of all purchases/outgoings for that month
On the outgoings spreadsheet include:
- Transaction number/reference
- Postage – Recording this separately will enable you to see how much you are paying to send items.
- Mileage – If you use a motor vehicle for business purposes, rather than claiming such things as petrol, we would recommend that you claim the HMRC approved mileage rate. This rate is designed to cover fuel, road tax, insurance and wear and tear on the vehicle and is tax-free. If the approved mileage allowance payment (AMAP) rate is used this does not need to be reported on the employee benefit forms for HMRC.
- Grand total