I have sold a product online and charged a shipping fee. When I create the invoice and the last line item is the shipping fee, I am not sure what account to assign this to. Is this an income or an expense? I, of course, have initially received this shipping fee from the customer, then I pay it out to the shipper when the order ships.
The shipping is income and expense.
On your invoice set up your Shipping Charge Item and link it to an Income Account.
When you pay the shipper, set up a Shipping Expense Account and use that as your expense.
15 Comments 15 December 10, 2018 05:16 PMThe shipping is income and expense.
On your invoice set up your Shipping Charge Item and link it to an Income Account.
When you pay the shipper, set up a Shipping Expense Account and use that as your expense.
December 10, 2018 05:16 PMI disagree. Shipping, as collected on an online sale, is no different than sales tax collected with a sale. That is, it is a liability that should not be included in the net from a sale. The shipping fee must be paid to the shipper (USPS,UPS,FedEx) when the goods are shipped to the customer, which, more often than not, is higher than calculated and collected from the online purchase. Otherwise, the total collected (including shipping) is subtracted from the COGS to show an inaccurate net from sale. The shipping fee needs to be ignored from net, not expensed.
September 24, 2020 06:50 AMThank you. How would you set that up?
October 14, 2020 03:25 PMYes, we want to track both the shipping income AND the shipping expense. I prefer to isolate my shipping income, by creating a correlating income account called "delivery income" or "shipping income" ..then down under my COGS section, I will see my shipping costs. That way you will be able to see if you are making a profit on shipping, or if you are losing money on shipping.
If you set up your customer invoice item to go only to an expense acct or COGS account, then what you are really doing is REDUCING your expenses or COGS totals on your Profit and Loss report. You actually can set up one item to cover both shipping purchases/expenses and shipping income by clicking the box that says "this item is used in assemblies or is a reimbursable charge". It sounds like you pay someone else to ship your products, and then funnel that cost onto the customer invoice to be reimbursed, so that is considered a "reimbursable charge".
Once you click that box, you will see 2 options now, on the left, it will have you assigning a COGS account to PURCHASE TRANSACTIONS, and then you assign an acct for SALES TRANSACTIONS, this is where you put in your Income Acct.
Hope that helps! I tried to add screenshots to this but it wouldn't let me. Best of luck!
October 14, 2020 03:46 PMExpenses relate to revenue, Liabilities relate to assets, and show up on your balance sheet. Liabilities do not show up on income stmt (profit and loss) Examples of liabilities, are your credit cards/loans, sales tax payable, payroll tax payable, garnishment payables, note payables. If you were to set up an invoice item to go to a liability account, it would pull the income and/or the COGS expense off your income stmt completely.
Though it might seem logical that since you collect sales tax from your customer and then you pay that same amount to the state you live in, this is not the same at all. By law, you cannot markup your sales tax to make a profit, but you have every legal right to charge a shipping/handling fee based on the percentage of the total sale, or you can do direct shipping cost, for example, you paid $4.95 so you charge the customer $4.95. its a wash. If you paid $4.95, and then you decided to charge the customer $6.00, you made a profit of $1.05. My point is liabilities are not the same as COGS whatsoever from an accounting tax standpoint.
February 07, 2021 03:26 PMWhat account do you all use for shipping income?
In the past, I set up Sales of Product Income > Shipping Income.
But I noticed there's a standard account for "Service/Fee Income."
Ultimately, they're both income accounts, but is Service/Fee Income more appropriate for shipping income?
November 17, 2021 09:31 PMShipping is an interesting character in the bookkeeping world. Yes you can use the income account on your invoices to show where you charged for the shipping. Then you use the expense accout to show where you paid Fedex, UPS, US Postal, etc. Both these accounts show on your profit and loss statement reflecting any profit made from shipping. (Such as I billed 20.00 on the invoice and paid Fedex 10.00 - I made 10.00 profit) That profit is taxable and is included in the bottom line of the Profit and Loss. ALL CORRECT AND GOOD.
HOWEVER, what it I want to be able to see an actual amount each month of what my shipping sales were? The shipping expense (the amt I paid out) doesn't reflect under the shipping income leading me to think I had more income than I actually did. Rember, it shows correctly in the bottom line on the Profit and Loss, BUT. what if I pay someone a percentage of sales. (The true amount of the sale is shipping income less shipping expense) I can't make shipping expense a sub account of shipping income. Sub accounts have to be the same type account as the "Parent" account. I only want to pay the commission percentage on the profit (or loss) from the shipping. ANSWER: 1. Record shipping on the icustomer invoice with it linked to an income account. 2. When you pay the bill, code it to the same account, (This will reduce your shipping sales income by the shipping expense all in one account and show under your sales. The outcome on the bottom line of the profit and loss statement is the same and everything is still good for tax purposes.