turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
turbotax icon
turbotax icon
turbotax icon
turbotax icon
cancel
Showing results for 
Search instead for 
Did you mean: 
Close icon
Do you have a TurboTax Online account?

We'll help you get started or pick up where you left off.

How to categorize Shopify Capital Financing?

Shopify offers capital to folks who sell via their web site platform. They financed us $1000, and we pay it back which each sale. (We give 13% back to shopify with each sale made via our web site.) How do I categorize the initial $1000 that came from Shopify Capital? And how do I categorize the bit of each sale I make that goes back to Shopify to pay back the initial balance of the financing they provided our small business?

Connect with an expert
x
Do you have an Intuit account?

Do you have an Intuit account?

You'll need to sign in or create an account to connect with an expert.

1 Reply

How to categorize Shopify Capital Financing?

From the way you've described the transaction and from what I can glean from the Shopify site, what you have here is a loan, a loan you're paying back by allowing Shopify to take a percentage of your remittances from your sales.

The initial $1,000 you'd enter on your business' accounting records as a loan:

Debit (Increase) Cash in Bank     $1,000

Credit (Increase) Loan from Shopify     $1,000

This entry will never show up on your income tax return because it's strictly a "balance sheet" entry.


As you make sales you'd recognize the full amount of the sales even though Shopify is going to take 13% of your remittance.  So if your sales for a particular day amounted to $150.00 you'd make the accounting entry in your business' accounting records:

Debit (Increase) Cash in Bank    $150.00

Credit (Increase) Sales Revenue         $150.00

These gross sales figures for the year are what you'll report as "Revenue" on Schedule C.


Of course Shopify is going to take 13% if that $150.00, and they are going to continue taking that 13% until you pay the full $1,000 plus interest to Shopify.  I have no idea how much interest they are going to charge you but for sake of illustration let's say that you've agreed to pay back $1,200.00, i.e., 20% of each payment they take can be considered "interest". ($200, the "interest", divided by $1,000, the "principal".)

So, on the same day that you made $150.00 in sales, Shopify is going to take 13% of that $150.00, or $19.50.  So  you'd make the following accounting entry:

Debit (Decrease) Loan from Shopify   $15.60

Debit (Increase) Interest Expense       $  3.90

Credit (Decrease) Cash in Bank                 $19.50

The "principal repayment" portion of this entry, the $15.60, will not show up in your income tax return as, again, it's strictly a "balance sheet" entry.  However the cumulative entries for the year for "interest expense" is a deductible business interest expense in your income tax return.

Tom Young
Use your Intuit Account to sign in to TurboTax.
By selecting Sign in, you agree to our Terms and acknowledge our Privacy Statement.
message box icon

Get more help

Ask questions and learn more about your taxes and finances.

Post your Question

Related Content

Manage cookies