Choose how to bring the data in
You can use a connection app that creates summary entries, export reports from Square and enter them yourself, or import a spreadsheet. Whichever you pick, work from Square's sales summary and transfer reports. Avoid recording only the bank deposits, because they hide fees, refunds and tax.
Map sales categories
Map Square items or categories to your income accounts. Gift cards, tips and sales tax are not sales, so give them their own destinations. Discounts and refunds should reduce income. Services and goods may need different accounts if margins differ or if sales tax treatment differs.
Fees and the bank deposit
Square deducts processing fees before the transfer. Record the fees as an expense. The deposit in the bank should equal gross card sales, minus fees and refunds, plus tips collected that are to be paid to employees if they are included in the transfer. Build the entry so the net amount equals the bank deposit line, and the feed can then match it.
Tips, tax and cash
Tips are a liability until paid out to staff, normally through payroll. Sales tax collected is a liability until remitted. Cash sales never pass through Square deposits, so make sure your daily entry includes them and the cash deposits you make at the bank. Keep a separate account for over and short.
Monthly checks
Reconcile Square's total transfers for the month to bank deposits. Compare sales tax collected to the amount reported on your sales tax return. Investigate payouts that are held, disputed or delayed. Square-issued loans or financing, if you use them, are liabilities and not income, with repayments taken from sales, so check how those are recorded.
If your files get complicated, keep a one-page procedure with the report names and steps for each month. That makes the process repeatable by you or a bookkeeper. Review it each year as Square changes its reports.
Example of a daily entry
A day with 1,000 dollars in card sales, 60 in sales tax, 100 in tips and 35 in fees would show income of 1,000, tax payable of 60, tips payable of 100 and fees expense of 35. The deposit would be 1,125 if the tips are included in the transfer. Writing the entry that way lets you match the bank amount exactly, and every piece stays visible for later review.
A refund appears as a negative sale and returns money from your Square balance. A gift card sold is a liability, and its redemption later becomes income. A dispute may withdraw funds and add a fee until it is resolved. Record each of these separately in your summary so they do not hide inside sales totals, and review them with your monthly reports from Square.
Common questions
Why does my Square deposit not equal my sales?
Because of fees, refunds, tips, timing and any held funds. The transfer report lists each piece.
Can I automate the whole process?
Often partly. Check the summaries regularly even when a connection app does the posting.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.