3/28/2024 0 Comments Cogs accounting operaitng expensesAutomatically 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. They are easily available in the income statement and other costs subtracted from the operating income to determine net profit. It does not include expenses such as the cost of goods sold directly related to product manufacturing or service delivery. 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. Operating Expense (OPEX) is the cost incurred in the normal course of business. 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. When you scan your income statements month to month, you’ll be able to spot any unexpected patterns easily. 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. Income – Cost of Goods Sold – Credit Card Fees = Gross Profit. 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. Depreciation is a non-operating expense if the asset being depreciated is used in a peripheral or incidental activity of an organization. Cost of Goods Sold (COGS) COGS are direct costs that tend to consist of variable costs, as the value is dependent on the production volume. Depreciation is an operating expense if the asset being depreciated is used in an organizations main operating activities. 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. Depreciation Could Be Either an Operating Expense or a Non-operating Expense.
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