What to take away
- Record gross sales, not the net deposit, and book the fees as an expense.
- A clearing account lets you match each payout to the sales behind it and shows what is still in transit.
- At year end, sales you earned but have not yet been paid out still belong in the year you earned them.
Why the payout never matches your sales
A processor collects customer payments, deducts its fees, may hold back a reserve, and sends you the remainder on a schedule. One payout can combine many sales, some refunds and one or more fee lines. If the customers paid $1,000 over three days and the processor sent $970, the bank shows only $970 and nothing explains the other $30.
Bank statements cannot answer this on their own, a point we make in our article about what bank statements leave out. The answer lives in the processor’s own reports, which is why you need them for every period.
Record gross sales, not the net deposit
For income tax, the CRA says most businesses must report income in the period it is earned, no matter when the money is received. A sale is earned when you complete it, not when the payout arrives. Recording the net deposit as sales lowers revenue by the amount of the fees, which also hides the cost of taking cards.
Record the full amount the customer paid as sales, with HST separately, and treat the fee as an expense. Your sales figure then agrees with your point-of-sale or invoice system, and your processing costs appear on their own line where you can compare them over time.
Use a clearing account
The most reliable method is a clearing account, sometimes called a processor holding account. Each sale debits the clearing account for the gross amount. Each fee and refund reduces it. Each payout moves money from the clearing account into the bank. When the books are right, the clearing balance equals what the processor still owes you and should agree with the processor’s own balance report.
This makes bank reconciliation straightforward, because each deposit matches one payout line. If the clearing account carries a balance you cannot explain, something is missing: a fee, a refund, a reserve or a sale entered twice. Many accounting programs can feed processor transactions in automatically, but check that the automated entries use gross amounts and not net.
An illustrative payout
Suppose a processor settles a payout for four days of sales. The figures are illustrative. Customers paid $2,000 in total, $100 was refunded, and fees were $60. The payout is $1,840. In your books, sales are $2,000, refunds are $100, fees are $60 and the bank deposit is $1,840. Anyone who reads only the bank statement sees $1,840 and cannot reconstruct the rest.
If HST is involved, the sales figure splits into price and HST collected. The processor’s fee may also include HST. Treat the two pieces the way your accountant has set up for your chart of accounts.
Fees and the HST on them
Processing fees are a business expense. If your processor charges GST/HST on its fees and shows it on the statement, you may be able to claim an input tax credit on that tax, since the CRA allows ITCs on tax paid on expenses used in your commercial activities. The claim depends on having documentation, which means the monthly fee statement or invoice, not only the bank line.
Fees that are netted from the payout still need to be recorded. Use the processor’s fee report to book them in full rather than estimating from the difference between sales and the deposit. If you are not registered for GST/HST, the tax on a fee is simply part of the cost.
Timing, reserves and year end
Payouts commonly arrive a day or more after the sales, so at any month end or year end there is money in transit. Sales earned on December 30 that pay out in January belong to the old year and sit in the clearing account at year end as a receivable from the processor. Your accountant will want that balance supported by a processor report.
Some processors hold back a reserve or freeze funds after a dispute. Record the reserve as an amount owed to you, not as a loss, until you know whether it will be returned. Cash-basis reporting is limited to certain taxpayers, so do not assume you can simply count deposits when they arrive.
A monthly routine
Download the processor’s payout or balance report each month along with the fee statement. Match each payout to a bank deposit. Confirm that sales in the processor agree with sales in your invoicing or point-of-sale system. Review the clearing balance, and chase anything old. Save the reports with your bank statements, since they are part of your supporting records.
This fits naturally into a month-end close. A short checklist, repeated every month, finds missing entries while the details are still fresh, and it saves a large cleanup at tax time.
Common mistakes and when to get help
The usual problems are booking net deposits as sales, forgetting fees, mixing several processors into one account, treating tips or deposits for later work as ordinary sales, and not keeping the monthly reports. Another is combining personal payments from the same processor account with business sales.
If you take online payments from customers in other provinces, the place-of-supply rules for tax can apply. That is a question for your accountant and our article on charging HST outside Ontario. Bring the processor reports, bank statements and your sales summary to a bookkeeping conversation so that the three can be reconciled together.
Sources & editorial notes
Sources checked October 24, 2026. The examples are illustrative and provide general information. Discuss how the guidance applies to your circumstances with your accountant.
- Accounting for your earningsCanada Revenue Agency
- Input tax creditsCanada Revenue Agency
- GST/HST and payroll recordsCanada Revenue Agency
- Business recordsCanada Revenue Agency
- Part 3A – Business income (Form T2125)Canada Revenue Agency
Rules and guidance can change. Use the current official source and confirm the treatment for your facts. To flag an error, contact Sora.