Subject: Understanding Stripe’s Credit Card Fee Accounting
Hi everyone,
I have a question regarding Accounting for credit card fees charged by Stripe, and I’d really appreciate any insight you could provide.
Previously, when we used Authorize.net, the process was straightforward. For example, if we submitted an invoice for $1,000, the client would pay it online, Authorize.net would then payout the full $1,000, and we’d see a $30 fee deducted from our account. This made it easy to apply the full $1,000 received directly to the invoice, leaving us with a clean slate.
Now that we’re using Stripe, things are a bit different. We only receive $970 for that same $1,000 invoice, leaving us with a $30 balance. We believe we should record an additional $30 payment on the invoice to balance it out to $1,000, but we’re unsure how to properly account for that.
We’re considering creating a separate account labeled “Credit Card Fees” for the additional payment. However, we’re uncertain about what the corresponding entry should be in our Accounting ledger. Would it be appropriate to create a “Fake Checking” account to offset this payment?
Thank you for taking the time to help me out!
Best,
Will
One response
Hi Will,
You’re on the right track with your understanding of the Accounting treatment for credit card fees, and it’s great that you want to ensure your entries are accurate!
In your case, when you receive $970 from Stripe for a $1,000 invoice, you’ll need to recognize the $30 as a fee expense. Here’s how you can handle the Accounting entries:
Invoice Entry: When you create the invoice for $1,000, you would record it normally. The invoice debits the Accounts Receivable and credits Sales Revenue or Service Income.
Payment Entry: When Stripe processes the payment and you receive $970, you should record this payment against the invoice.
By doing this, you essentially reduce the Accounts Receivable to zero while recognizing the $30 credit card fee as an expense. There’s no need to create a “Fake Checking” account; instead, you should directly credit the Accounts Receivable and recognize the expense in your financial records.
This way, your income statement will reflect the actual revenue earned ($1,000) minus the expense incurred ($30), giving you a clear view of your earnings after fees.
Let me know if you have any further questions!
Best,
[Your Name]