PayPal in Banking

Once PayPal is connected, HQ adds a PayPal account under Ledger › Banking › Accounts, beside your bank accounts. It behaves like a bank account that PayPal feeds instead of your bank: it shows Connected, and where a bank shows what the bank reports, PayPal shows PayPal's own balance, with the date it was read.

What posts on its own

• Sales, refunds and PayPal's fees post as one entry for each day, such as "PayPal sales, 29 Oct 2026". The entry adds the day's net to the PayPal account, with your sales, the sales tax and PayPal's fees in their own accounts. If a payment paid a Shopify or WooCommerce order you have connected, the tax comes from that order. A day is settled a few hours after it ends, so today's sales appear tomorrow. If HQ has not yet read which PayPal payment paid an order from around that day, the day waits for it, at most three days, and then posts with what it has. A day whose sales already took their orders' tax, or that has no sale, does not wait. A waiting day is named on the month's close checklist and on the Period Lock page.
• Every fee PayPal charges, including the fee for withdrawing to your bank, goes in that day's fees, so the transfer itself is the amount that reached the bank.

A day that was posted is never rewritten. A PayPal row that turns up late goes into a new entry for that date, or, if that date is in a locked period, on the first day after the lock.

What waits for you

Anything else on your PayPal statement is an ordinary line in Banking to categorize, with your rules and remembered categories applying as on a bank line: a supplier you paid from your PayPal balance, a purchase, or a PayPal code HQ does not know. Nothing is dropped. If a line is still uncategorized, PayPal's balance and your books will differ by that amount until you categorize it.

Moving money to your bank

A transfer from PayPal to your bank appears twice, once as a withdrawal on the PayPal account and once as a deposit on the bank account. HQ pairs the two as a transfer between your own accounts, not as income, whichever arrives first.

• A deposit you have not categorized is paired automatically when exactly one match fits.
• A deposit you already categorized is offered to you, never changed. The books-health card that counts the PayPal transfers to pair with your bank lists them; pair each one, and the deposit's category is replaced by the transfer.
• A withdrawal with no matching bank deposit yet posts nothing and waits. Transfers from your bank into PayPal pair the same way.

Purchases paid through PayPal with a card or your bank

When you pay a supplier through PayPal and PayPal takes the money from your credit card, debit card or bank, PayPal shows two lines at the same moment: the payment to the supplier, and the money that came in from the card or the bank to cover it. Your card or bank statement shows the same charge again, usually as "PAYPAL " or "PP" followed by the supplier's name.

HQ pairs the line that came in from the card or bank with that charge, as a transfer between your own accounts. The payment to the supplier stays the expense: categorize it in Banking, on the PayPal account, where the supplier is named.

• The pair is made automatically when exactly one charge fits: the same amount, dated that day or a few business days after, on a Credit card or bank account you have in Banking › Accounts, and naming PayPal.
• When two charges of the same amount could fit, the books-health card lists them and you choose which one to pair. Until then, your rules and HQ's suggestions leave both uncategorized.
• If you already categorized the card or bank charge, it stays as it is: that charge is the purchase's expense. Only if you categorize the PayPal payment as well does the card offer the pair, so the purchase is not counted twice. It is never offered inside a period you locked or a sales-tax period you filed.
• A purchase in another currency is not paired. PayPal converts the money and keeps the foreign payment off your books, so categorize the card or bank charge as the expense. PayPal's own rows for that purchase, including the money it took from your card or bank, stay out of your books and are listed on the card for PayPal rows not in your books.
• If PayPal hasn't shown what the money from your card paid for, the card lists the pair for you to check rather than pairing it.
• To undo a pairing, open either line in Banking and choose Undo transfer under Change what this is.

A deposit already marked as a transfer

If a bank deposit was marked as a transfer on its own, with nothing paired to it, it still pairs with its PayPal side, automatically when exactly one fits, or from the card. A line that is already paired never pairs a second time: undo the first pairing before pairing it differently.

A PayPal day never matches a bank deposit, and it never shows as an open payout to chase. Each day's sales, fees and net are listed on the PayPal account under PayPal sales by day, and on Ledger › Banking › Payouts, where a PayPal day reads In PayPal.

Where PayPal history starts

You choose this when you connect PayPal: the start of your open books (the default), today, or a date between. HQ never starts inside a period you locked or a quarter you already filed a return for, because adding PayPal sales there would change a return already sent.

Sync further back. On the PayPal account in Banking › Accounts, open the PayPal feed and click Sync further back to read older PayPal history, as far as the start of your open books. On the Free plan HQ reads only the last 30 days of history, and the screen says so. If PayPal's starting balance is in your opening balances, take PayPal's line out of them first; HQ will not read further back while that figure is there. The start only ever moves earlier: moving it later would remove entries already in your books. HQ reads the added days once, replaces the PayPal opening with PayPal's balance on the new start date (for you to confirm, below), and lists any bank deposits the added days overlap (below).

The opening balance

PayPal's balance at the start of its history in HQ is the PayPal account's opening. HQ never adds it to your books by itself: you confirm it.

• If PayPal history starts the day your books start, a card says what PayPal held when your books start, with the amount and the date. Add it for PayPal in your opening balances.

• If PayPal history starts later (you chose today, or your books are closed up to a later date), a card says what PayPal held when its history in HQ starts. It explains that the amount may include sales you made before that day and never recorded (for example, sales you used to record only when the money reached your bank), and offers two choices:

  • Leave it for my accountant: the whole amount goes to Opening Balance Equity.
  • Part of it is sales I haven't reported: enter that part, tax included. It is recorded as sales and sales tax, dated with the opening, and is on the return for that period (not the closed period the sales were made in). The rest goes to Opening Balance Equity.

  The opening is dated the day before the start, or the start day itself when the day before is closed. Either way it is listed in Notes for your accountant with both figures. The card has Ask your accountant if you are not sure.

Either way the account can then match PayPal's own balance. If PayPal held nothing at that date, nothing is needed.

PayPal deposits you already recorded as sales

Before PayPal was connected you may have categorized each PayPal deposit in your bank as sales. Once HQ reads PayPal's history, the same money is also a day of PayPal sales, so it would be counted twice. A card counts the bank lines you categorized that are also a transfer from PayPal and lists them: date, amount, bank account and the category each has now. It lists only money that came INTO your bank from PayPal; a bank payment that topped up PayPal is left alone, because it may be a purchase paid through PayPal that you coded correctly. Record these as transfers from PayPal records them all in one step, replacing each category with a transfer between your own accounts, and says which ones it could not record and why. Each one can still be undone on its own in Banking. Dismiss the card to leave them as they are.

When PayPal's balance and your books disagree

A gap on the PayPal account raises the same books-health card as a bank account does. The usual causes, in order:

1. Lines waiting to be categorized in Banking (clear them).
2. The opening balance has not been entered or recorded (see above).
3. Withdrawals waiting for their bank deposit to arrive (pair them).
4. Rows left out because they are not in your home currency (below).

A dispute hold is not a cause: HQ counts it as the difference (see the next section).

HQ compares at the last day it has settled, not at this minute, so a sale made an hour ago does not cause a gap.

When a buyer opens a dispute

When a buyer disputes a PayPal payment, PayPal holds the money from that sale (what you received, after PayPal's fee) until the dispute is decided, and leaves it out of your PayPal balance. HQ records nothing for the hold: the money is still yours while the dispute is open. Your PayPal account in Banking › Accounts shows PayPal is holding $X while a dispute is open beside PayPal's balance, and a books-health card names the sale. The account still matches PayPal, with the hold counted as the difference.

When the dispute ends, HQ records whatever PayPal did, the next time PayPal syncs:

• PayPal refunds the buyer, or reverses the payment: it is recorded as a refund of that sale in the day's PayPal sales, with its sales tax given back. A chargeback fee is recorded as a fee.
• The buyer's card issuer takes it back: PayPal lists a chargeback rather than a refund or reversal, and it arrives as a line on the PayPal account in Banking for you to categorize, the same as any PayPal line HQ cannot record on its own.
• You win: PayPal releases the hold and nothing changes in your books.

A dispute that was already open when you connected PayPal. PayPal's balance on your start date leaves that held money out, so the opening balance HQ offered you is short by it. HQ reads PayPal's holds from up to 180 days before your start date when it first reads your history, so it knows about such a dispute. When PayPal releases the money, the card that says your books and PayPal disagree names it: add that amount to the PayPal account's opening balance (Ledger, Accounting, Opening balances).

If the card says a hold has been open a long time, check the dispute in PayPal. If you lost it and PayPal kept the money without a refund or reversal showing in your PayPal activity, ask your accountant how to record the loss.

What is left out: other currencies

In this version PayPal is kept in your home currency. A row in another currency, including both halves of a currency conversion, is held off your books and named on a card that counts the PayPal rows not in your books. HQ never records a foreign amount at par. Record those rows by hand if they matter for this year; until then PayPal's balance and your books can differ by their amount.

If a customer pays a store order straight to PayPal

When a customer pays a Shopify or WooCommerce order by sending money to your PayPal and you mark the order paid by hand, the order's sale and tax are already in your books from the order. A PayPal payment from the email address on that order, for exactly its amount, within a week of the order's date, becomes a line on your PayPal account that settles the order, so it is not counted again as a PayPal sale. The order shows Matched on Ecommerce › Externally Paid, with your PayPal account as its deposit. When HQ can't be sure which order it paid, it stays in that day's PayPal sales.

If HQ finds the order but can't record the payment against it, for example because its date is in a period you closed or the PayPal account has no ledger account of its own yet, the line waits on the PayPal account and posts nothing. A books-health card titled "PayPal payment for a store order is waiting" names each one by amount, date and order, and says why. It counts every waiting payment; two payments naming the same order are one row, and the card says only one of them can be that order's payment. Open the payment opens the line in Banking; match it to its order in Ecommerce › Externally Paid.

If you marked the order paid after PayPal's day was already settled, the sale is inside that day's PayPal sales and the order is also waiting in Externally Paid. Open the order there, expand its row and choose Paid through PayPal?: the sheet shows what will move, and Yes, move it takes the sale out of the PayPal day and settles the order with it, so they count once. The order then shows Undo. A PayPal payment line that is waiting on the PayPal account in Banking and may pay such an order says "Waiting for" the order and links to Externally Paid; it doesn't offer Not an invoice payment. If the line isn't that order's payment, categorize it on the PayPal account. A refunded order or sale can't be moved, so move the sale first. If you had matched the order to the bank deposit of your PayPal transfer instead, expand it under Matched in Externally Paid: Paid through PayPal? records that deposit as the transfer and settles the order with the PayPal payment.

When PayPal refunds a payment that settled a store order, the refund is a money-out line on the PayPal account, not part of that day's PayPal sales. Mark the order refunded in the store as well: once the store's refund is in HQ for the same amount, HQ records the line as that refund's payment (Ecommerce › Externally Paid, Matched refunds). Until then the line waits, and a books-health card titled "PayPal refund of a store order is waiting" names it. If the refund was made only in PayPal, a week after it the line offers Book PayPal's refund: confirm it and HQ books PayPal's amount as the order's refund, in the order's own tax mix, paid by that line. The store showing the same refund later books nothing more, and Undo takes it back out.

If a client pays an HQ invoice through PayPal

HQ books the payment once, against the invoice, never as a PayPal sale too.

• You marked it paid from PayPal's email. Open PayPal's "You received a payment" email in Mail and use the banner to mark the invoice fully paid. HQ reads PayPal's Transaction ID from the email and holds the payment in Undeposited Funds, even when your book's Received payments deposit to setting sends payments straight to cash: the money is in PayPal, not in your bank. When the same payment arrives from PayPal, it becomes a line on your PayPal account, not part of that day's PayPal sales, and HQ matches the two for you. PayPal's fee on it still goes into the day's fees.
• PayPal shows it first. A payment from your client's email address, for exactly what one of their invoices still owes, becomes a line on your PayPal account and waits. Open the invoice and choose Match deposit: the PayPal payment is on the list. Until you match it, the PayPal balance card counts it as a line waiting.
• A PayPal payment was counted as a PayPal sale, but it paid an invoice. Open the invoice and choose Paid through PayPal? (it shows only when HQ finds a PayPal payment that could be the one). Each payment is listed with the payer's name, the date and the amount. Pick the payment. The sheet says what will happen before anything changes: the sale comes out of that day's PayPal sales, the invoice is paid with it, and the invoice's own sales and tax stay, so they count once. If that PayPal day is in a closed or filed period, the correction is recorded on the first open day and noted for your accountant; the sheet says so. Choose Yes, this paid the invoice. The invoice's payments then show Paid through PayPal with the date, the amount and the PayPal day it came from, and Undo.
• Starting from the PayPal day. Open a PayPal day from PayPal sales by day on the PayPal account, or from Ledger › Banking › Payouts. Its sales are listed with each payer. This paid an invoice lists the invoices that sale could have paid; choose one and the same sheet opens. A sale already moved names its invoice instead.
• The invoice was paid by matching a bank deposit that is really your PayPal transfer. The same sheet names the deposit and asks. Choose Yes, that deposit is my PayPal transfer and HQ un-matches the deposit, records it as a transfer from PayPal, and pays the invoice from the PayPal payment. Choose No, it is not to keep the deposit as it was.
• Some PayPal payments may be invoice payments. After the first PayPal history read, and after each Sync further back, the PayPal account in Banking › Accounts can show a card with that title. HQ builds it in the background, so it can appear a little after Sync finishes. It is checked again each time you open it: a payment you have since moved or categorized leaves the list, and a PayPal email that arrived later can upgrade a row to the email-confirmed group. Each row is a PayPal payment that looks like the payment of an invoice you have already recorded, with the payer, the amount and why HQ thinks so. Rows confirmed by both PayPal's own email and the client's email address are recorded together with Record these as invoice payments. Rows that match only by the payer's email address and the amount are recorded one at a time with Record this. A row that could be several invoices has a picker; choose the invoice first. None of these closes the whole list, and Not an invoice payment closes one row. Nothing is posted by closing a row, and it is not offered again. If you marked the invoice paid after the row was listed, the row says so, is left out of Record these as invoice payments and has no Record this: open the invoice and choose Paid through PayPal?, which shows what will change first. A row HQ cannot record shows the reason beside it.
• A PayPal payment is waiting in Banking but is not an invoice payment. Open the line on the PayPal account in Banking and choose Not an invoice payment, then Yes, not an invoice payment. It goes back into that day's PayPal sales. If that day is closed, it is recorded on the first open day and noted for your accountant. HQ refuses, and says why, when the line is already matched or categorized (undo that first), when an invoice payment already carries that PayPal payment, or when the sale paid a store order. It also refuses when a store order of the same amount, from the same week, is still waiting for its payment in Ecommerce › Externally Paid (when PayPal recorded who paid, only an order from that customer counts): if the line is that order's payment, match it there instead. If it is not, categorize the line on your PayPal account in Banking.

If a PayPal payment was counted as a sale and you cannot find it under Paid through PayPal?, the invoice's amount, date or client does not fit it. Ask your accountant how to close the invoice against that day's sales.