Here we explore balance accounts and how they are used within our sales and deposit journal entries
Common journal entries we perform include both sales and deposits on a daily basis. We book your sales from the prior day which may contain a number of tender types e.g. Stripe, Square, Shopify, etc. Additionally, we capture any deposits coming to your bank account related to those sales.
In the example below, this customer completed sales that were processed by PayPal and Shopify. As these sales occur, the balances in their Shopify and PayPal balance accounts are increasing. This is similar to an expected deposit. However, you may choose to keep this balance with Shopify or Paypal which is essentially acting as a bank account.
As your balance account increases, you may choose to transfer some of this balance to your bank account which results in a deposit journal entry as shown below. In the example below, Shopify is also taking out some fees which reduce the actual amount hitting your bank account. As you can see the Shopify balance account is being reduced as money deposits to your bank.
As you can see balance accounts are becoming more common with the many payment processors. As sales occur the balance account increases and with each deposit to your bank the balance account decreases. With the linkage between the two, we definitely recommend mapping the balance account in the sales and deposit journal entry templates to the same account to ensure the increase and decrease with sales and deposits is easily reconciled.