Shopify Accounting | Everything You Need to Know

Shopify accounting can be a royal pain in the neck if you don’t know what you’re doing. Also, what level of detail do you need if you’re a start-up company vs. an established business?
In this tutorial, Brittany Brown, CEO of LedgerGurus, explains:
👉Three different methods of Shopify accounting in QuickBooks Online
👉 When a business would want to use each method
👉Walks through how to do each method
◾◾◾◾◾◾◾
🔥 If you're interested in outsourcing your ecommerce accounting and having the experts handle it, click here to contact us: **
ledgergurus.co...
◾◾◾◾◾◾
⬇️ MORE STUFF YOU SHOULD CHECK OUT ⬇️
** RESOURCE MENTIONED IN THE VIDEO: **
** eCommerce Bookkeeping Checklist **
ledgergurus.co...
** RELATED BLOG: How to Do Your Shopify Accounting | Everything You Need to Know **
ledgergurus.co...
Brittany also references several other videos explaining how to do other aspects of accounting that you’ll need, so if you’re looking for them, here are the links:
** VIDEO: QBO Bank Feeds Setup **
• QuickBooks Online Bank...
** If you’re wondering why you DON’T want to sync Shopify to QuickBooks, read this: BLOG: Shopify-Quickbooks Integration | Rethink the Sync **
ledgergurus.co...
** You may also want to keep a heads-up for these 5 Common Shopify Accounting Mistakes **
ledgergurus.co...
**For more information about your financial statements, including how to set them up properly, check out our Financial Statements series of videos:
1 - An Intro to Financial Statements | for eCommerce Businesses
• An Intro to Financial ...
2 - How to Read & Analyze Your eCommerce Income Statement
• How to Read and Analyz...
3 - How to Read & Analyze Your eCommerce Balance Sheet
• How to Read and Analyz...
4 - How to Understand Your eCommerce Cash Flow Statement
• How to Understand Your...
5 - Setting Up Chart of Accounts in QuickBooks Online | for Online Sellers
• Setting Up Chart of Ac... rs
** eCommerce accounting is VASTLY different from regular accounting. If you have an accountant doing all this for you, you may want to check that they’re doing things right. Download our “5 Signs of Bookkeeping Trouble with an eCommerce Business” to know what to look for: **
ledgergurus.co...
** If you're interested in our ECOMMERCE ACCOUNTING SERVICES, click here to contact us: **
ledgergurus.co...
◾◾◾◾◾◾◾
🧑‍💻 EMPLOYMENT OPPORTUNITIES:
We are always looking for awesome CPAs, accountants, and bookkeepers to join our team. If you're interested in working for LedgerGurus, check out our careers page:
ledgergurus.br...
◾◾◾◾◾◾
👋 SAY HI ON SOCIAL:
Website: ledgergurus.co...
Facebook: / ledgergurus
LinkedIn: / ledgergurus
Instagram: / ledgergurus
• Shopify Accounting | ...
#shopifyaccounting #ShopifytoQuickbooksOnline #LedgerGurus

[@LedgerGurus]

Thanks for watching! Please comment with questions below. Need help with your Shopify accounting? Contact us here - ledgergurus.com/services/shopify-accounting-services/

[@BlackTieBarn]

"This kind of scenario can only end in tears". 🤣😂 I am going to be using that for a while. Lol

[@debSilbert]

BEST TRAINING VIDEO YET! Right level of content, detail, and speed.

[@jizellemontilla6235]

Best content out there for shopify bookkeeping. Cant believe I was learning this for free 🥰

[@LedgerGurus]

We're so glad we could help!!

[@sankarbanerjee8577]

superb content @@LedgerGurus

[@LedgerGurus]

@@sankarbanerjee8577 Thank you!

[@RobbinLynn-de9ko]

Fantastic help. I was going a little nuts because none of the reports matched up. Thank you for making it super easy to understand and now I know which method to use for our business.

[@LedgerGurus]

You're welcome! I'm glad it helped. :)

[@aryanasmith4426]

The quality of the content of your video was great. Very impressive. Will be waiting for more updates. Keep posting.

[@LedgerGurus]

Thank you so much. More to come!

[@ecombalance3501]

Thank you for this video. In only a few minutes, you've answered numerous questions concerning Shopify accounting!

[@LedgerGurus]

Yay! Glad it was helpful. :)

[@toddjal]

Credit where credit is due! (probably an accounting joke in there somewhere). This video was incredible. I've been using a similar approach with my Amazon business, and this aligned so well. You have an incredible gift to go quickly, but still address the most important info, and in the order it needs to be given, saving the super advanced stuff for courses. Thank you sooooo much. ⭐⭐⭐⭐⭐

[@LedgerGurus]

Wow! Thank you for taking the time to share that. We really appreciate you. Have an awesome day!

[@browtool]

Amazing presentation!! Thank you for teaching your excellent skills

[@LedgerGurus]

So nice of you. Thank you!

[@amandacorkin717]

Exactly what I was looking for! Thank you thank you

[@LedgerGurus]

Glad I could help! You're very welcome. :)

[@OSOMHealth]

Great video. Very helpful. I am setting up a new e-commerce business and I am happy I found you.

[@shantirowleyart]

A little complicated for my beginner brain but very helpful and thorough

[@LedgerGurus]

Thank you! So glad it was helpful!

[@LedgerGurus]

Glad it was helpful!

[@Art_Van_Delay]

You're my new best friend. I just left the other KZbinrs. Thank you so much.

[@LedgerGurus]

Yay! Welcome friend!

[@Quixolution]

Excellent. Thank you for being so thorough!

[@LedgerGurus]

You're welcome!

[@marygithui3624]

Thank you Brittany for sharing your knowledge with us!

[@samanthasmith4385]

Thank you so much for this video. Super helpful and well presented. Your time and effort is most appreciated!

[@rameezmughal4915]

Great ,This was very helpful. Thank you!

[@WH05DAT]

TONNE OF VALUE! My accountants were trying to make me pay 20% Sales tax on all of my Shopify Payments, not considering the fact our International orders are 0% tax, childrens clothing is 0% and motorcycle helmets are 0% - Not to mention, it would be inaccurate in comparison to Shopify's figures. Knew i wasn't losing it (my mind) lol Thanks a tonne

[@LedgerGurus]

You're very welcome!

[@calleylafon1742]

This was amazing, I learned so much and had so many questions answered to my Shopify accounting confusions!! thank you!!!

[@LedgerGurus]

You're so welcome! Glad we could be helpful.

[@georgeneamodia7240]

You are the best Britt!

[@LedgerGurus]

Yeah, we think she's pretty awesome, too!

[@Clucehilton]

great video - thank you!

[@jaybutera5069]

Thanks for sharing this. Super-helpful.

[@jamilabuwardeh5817]

You are awesome. Thank you for sharing this great information. Wishing you amazing success in your business.

[@LedgerGurus]

You are so welcome! And thank you for the well wishes!

[@lindabelcher7502]

SO HELPFUL!!!!!! Thank you!

[@nusaibahkofar-naisa4464]

This was very helpful. Thank you!

[@LedgerGurus]

You are very welcome. We're glad to help.

[@burhannbektas]

Great contribution to the space!

[@themarinamonette]

Extremely excited to start with the "Shopify Detailed Method." A question I had is for setting up the Holding account. Would it be a sub account of your bank account? I think the answer is no, because it would be obvious in your chart of accounts. But how does this work as far as confirming your books on a daily/weekly basis. Because isn't this method done on a monthly basis?

[@LedgerGurus]

Holding accounts are not sub accounts of existing bank accounts, but they are classified as Bank Accounts in the chart of accounts. They essentially hold "cash." The money sitting in the holding accounting is the "cash" owed to the company but hasn't been transferred yet. Or in the case of Paypal, it may stay in that account. Most payment processors have a cadence that they transfer money to the company on - ie, every Tuesday, or every other Tuesday, etc.

[@ThyKingdomCome..]

Which are the best recommended payment channel to use instead of having so many and to avoid tears like you said 😁. Thank You for your advise.. im starting my online business on Shopify and I'm learning all the ins and out before I open my shopify account..

[@rpstudylinks438]

Fantastic content!!

[@rw4690]

Such a great video!! I've watched it so many times, I can almost recite it! =) Question though, how would you handle gift cards that are charitable contributions in the JE with all the sales report lines? They show up in the sales report once redeemed, but if I use the Shopify details method, it would book the full amount under Payment Processor Fees, when only the actual COGS purchased by the gift card would be the expense amount? I've racked my brain for hours trying to figure this out... 🤯

[@LedgerGurus]

Gift cards should be booked as a liability to the business at the time they are purchased, and then you reduce the liability when they are redeemed. The sales amount for the order would be booked against the liability instead of to income.

[@slimshadycustoms]

Thanks for posting this. It is very helpful. I decided to use method #2 for my business. The one question that I had was what to do with the shipping costs. You recorded product sales income and shipping income, but I didn't see how you back out the actual cost of shipping. If you don't do that, aren't you way overstating your sales number, or don't you worry about that because you back it out later as a business expense? I would like to be able to compare what I am collecting for shipping vs what I am charging for shipping.

[@LedgerGurus]

We usually record shipping cost as an expense after COGS.

[@Brownflower]

amazing video, very insightful

[@LedgerGurus]

Thank you. We appreciate that. :)

[@jamieryan7576]

Great vids

[@user-Mita231]

Thank God i found you. You have been so helpful. What if the client has a website where they can pay using Stripe and Paypal and now recently opened a Shopify store where they can pay thru Shopify, Affirm and the SAME paypal account ? The paypal trans in the bank feed don't differentiate between her regular website and her Shopify store and i don't think i should have to log in to her paypal to check each one. How would i handle that ? She also used the QBO Shopify connector to integrate Shopify with QBO but i think with your methods , i don't need it and can disengage ? She is right at the 250k mark.

[@LedgerGurus]

PayPal accounts are free to set up and have no monthly fee. We strongly recommend you have your client open a second PayPal account for her other site. And don't integrate Shopify with QBO. It creates an enormous mess. Watch this video to see why and how to address the issue - kzbin.info/www/bejne/hImpl2Z3ptenec0.

[@user-Mita231]

@@LedgerGurus - i thought that with Paypal you can only have 1 personal and 1 business account ? She asked me the same questions.

[@LedgerGurus]

@@user-Mita231 We have several clients with multiple accounts and it’s never been a problem. I had never heard of that one account rule.

[@AshleyPaul-g6v]

Hello! Once all revenue and tax amounts are accounted for on the entry...how are you going back and accounting for all payment processing fees on the acctg guru example?

[@LedgerGurus]

You set up an account for it in your Chart of Accounts. Then, allocate the fee amount to your payment processing fee account.

[@debSilbert]

The payment processor fees you're speaking of are all of those listed under "Additional Payment Methods", correct? So if you only have PayPal there, the only fees you'd not be accounting for are the PayPal fees, because the Shopify fees are already accounted for.

[@irynaestevez5145]

Great content - thank you so much. I'd say I use a hybrid of your Method 2 and 3 in my practice but would most definitely like to learn in more detail about your Method 3. Are there courses currently available on your website? I didn't seem to find what I was looking for. Thank you so much again.

[@LedgerGurus]

We don't currently have any Shopify Accounting courses, but we do consulting all the time. You can fill out a form to be contacted by one of our consultants here: ledgergurus.com/ecommerce-accounting-services/qbo-a2x-setup-and-consulting-services/

[@user-Mita231]

I have a question. How would method one work when they receive a 1099k from Shopify and they want to try and match it ? And also i guess they would need to keep track of their sales tax outside of QBO?

[@LedgerGurus]

For really specific questions like this that require a detailed explanation, we recommend you schedule an ecommerce consultation so one of our experts can walk you through it and answer all your questions. - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation

[@debSilbert]

Do you include the vendor's actual shipping costs as contra income account to Shipping Income so you can keep track of how much they're making on shipping?

[@JB-dv7ew]

FYI classes is not available or at least anymore on the simple version

[@LedgerGurus]

Thanks for letting us know.

[@mjhamaplewood]

Great video - very helpful. One question on sales tax recording in QBO. With any of this approach, does QBO have the information to know how much tax to be paid to which entities? Specially States which has county level taxes?

[@LedgerGurus]

Quickbooks is not capturing sales tax unless you enter each transaction one by one, so we recommend using a separate sales tax filing tool.

[@chrisjichen]

Very good🎉

[@LedgerGurus]

Thanks 🤗

[@JB-dv7ew]

Okay so for the details part you did shopify payouts but what about shopify billing?

[@LedgerGurus]

If you have specific questions on ecommerce accounting, you'll probably get them answered better in an accounting consultation with one of our experts than in a KZbin comment. You can schedule that here - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation

[@user-xq6xy7vh6p]

I have a question, do you find that the sales order reports in Shopify change? Once I download a days activity, I sometimes come back to it and it changed!

[@LedgerGurus]

That's interesting that the downloaded report is changing since it is essentially a snapshot of activity. If there are discrepancies between the downloaded report and your dashboard, there are many reasons for that including sales activity, filtering, order updates, etc. You may want to reach out to Shopify's support team for help and clarification.

[@jenniferjames7471]

Help! I'm a tshirt printer. One of my clients is a school pto. they offer their shirts on shopify and in person. in the past I'll written them a check for their commission and it's been an expense. But this year they want me to just give them a credit toward the shirts they buy from me and sell at the school in person. how do i make sure my books are transparent in this scenrio?

[@LedgerGurus]

I'm not sure that the comments section is the best place to answer this fully. I would suggest that you look into our ecommerce consultation so you can be sure to get your question answered completely - calendly.com/ledgergurus-bd-team/ecommerce-accounting-consultation

[@phollihn]

Fantastic video and great delivery! Quick question - when transferring Paypal sales into QB each month does this transfer have to be done exactly at the end of each month or is it ok to be a day or two off? Thanks

[@phollihn]

Does the detailed method work with Paypal lag / timing being slightly off from the month Journal entry facts??

[@LedgerGurus]

You can be a little late, it will just create a small timing issue if you have sales settle the first few days of the month and you are basing paypal sales in QBO on transferring over the balance. The idea with using the end of the month to transfer is to Keep the sales recording in the right period on QBO.

[@user-Mita231]

My client really wanted to do net reporting and so i chose the first method. What happens at year end when the net deposits don't match the Net income on Shopify ? I am thinking there is a bal left in Shopify and do i need to adjust QBO for year end ? Confused. Thanks so much

[@LedgerGurus]

Yes, you will need to make adjustments. This is the downside of that method.

[@melissawattley2902]

@@LedgerGurus so like a year end je you mean to adjust the net sales ? Can you clarify a little please ?

[@user-Mita231]

@@melissawattley2902 Hello, can you please clarify a little ? Would really appreciate it !

[@dotflakes]

Thank you very much for this excellent useful video. Could you please help me how to record the difference between shopify order amount and paypal processing payment in case of foreign currency? My store local currency is CAD; as usual shopify captures all orders as CAD amount; the problem is if paypal processes the payment with USD, AUD etc. there is always discrepancy due to exchange rate. If shopify shows 100CAD as sales amount; paypal shows slightly different amount. How can I adjust this differences? Is it ok to adjust with transaction fees?

[@LedgerGurus]

The answer to this question is really too complex to answer in a comment but it's a great idea for another KZbin video so we can really show the process.

[@dotflakes]

@@LedgerGurus thanks.

[@debSilbert]

Does Shipping Income get included on the year end 1099-K?

[@xpinaygirlx]

Hello! I have figured out everything EXCEPT for the sales tax. I live in VA and I have my Shopify store set to collect taxes for my state, and it does. The issue I'm having is that I do manual entries and when I put in the entry that shopify collected for sales tax for the month, it doesn't match what I actually pay. It's not far off, only by cents, but when the payment goes through my checking account in the bank feed and I code it to Sales Tax Liability, i'm not sure what to do. I'm just trying to understand how it looks in my books. If it gets credited to the liability account in a JE as what shopify says it is, what do I do with it when it comes through the bank feed as a payment for a different amount?

[@LedgerGurus]

We record it as a liability initially and the payment will decrease that liability and any over payment and under payment will be recognized on the P&L as an expense or income. Vendors collection credit will be other income as well.

[@patrickleavy5804]

hey, great video! how do you account for cost of sales?

[@LedgerGurus]

We're going to be publishing a video about this very thing very soon. Subscribe to our channel so you'll be notified when it's live.

[@tiffanychandler4039]

What about for Desktop QB?

[@LedgerGurus]

We don't work with Desktop QB at LedgerGurus. We recommend doing everything in the cloud since your business is in the cloud anyway.

[@8sun52]

I'm so lost with all this. This is not my world at all. Can I export my four Tshirt designs that are sampled on four POD Customcat colors, as one listing? POD Customcat had me do that, exporting them over to Etsy. (I cancelled Etsy). How do shoppers sample the designs on the nineteen POD Customcat colors my designs stand out on best? I'll be linking POD Customcat with Shopify. I want them to click a color choice for a design of their choice. Also, the POD Customcat Tshirt dimension chart. How does that get imported into Shopify? I was only able to provide a link to it on Etsy. But but I want the actual dimension chart on my store. The tutorials are just generalities and don't address the real world set-up of my store. How do I actually do this?

[@LedgerGurus]

I'm sorry, but this isn't our wheel house at all. We focus on accounting. I encourage you to contact Shopify's customer support to get the help you need.

[@8sun52]

@@LedgerGurus OK