Journal entries of a Shopee sale

Meet Kuting Kitchen

Kuting Kitchen OPC sells cat food on Shopee, Lazada and TikTok Shop. It's a One Person Corporation, VAT-registered, so every sale includes 12% VAT.

We'll follow just one order through its books.

Dry cat food is sold

A buyer orders dry cat food, 1.5 kg, for ₱480 and pays Shopee. Shopee holds the money until the order is delivered; Kuting Kitchen hasn't been paid yet.

The price includes the VAT

The ₱480 price already includes VAT. To find it, divide by 1.12: ₱480 ÷ 1.12 = ₱428.57 is the sale itself, and the remaining ₱51.43 is VAT, money collected for BIR.

That ₱51.43 is called output VAT: tax the buyer paid on top of the price, which Kuting Kitchen only holds until it hands it over to BIR.

Entry 1: record the sale

The sale goes in the sales journal the day it's invoiced. Shopee owes Kuting Kitchen the money, so it's recorded as a receivable, not cash.

Debits always equal credits: ₱480.00 = ₱428.57 + ₱51.43.

Shopee pays out, minus two things

Entry 1 left Shopee owing Kuting Kitchen ₱480. After delivery, Shopee pays that off, but only ₱405.86 arrives. Two amounts were taken out: ₱72.00 in fees and ₱2.14 of tax withheld.

Neither is a loss to ignore. Both matter at filing time.

Shopee's fees include VAT you can claim

Shopee is VAT-registered too, so its ₱72.00 fee includes ₱7.71 VAT. That's input VAT: Kuting Kitchen can subtract it from the VAT it owes, as long as it keeps Shopee's VAT invoice for the fees.

The fee itself, ₱64.29, is a business expense.

The ₱2.14 is tax already paid

Marketplaces must withhold 0.5% of the sale before VAT and pay it to BIR for you: 0.5% × ₱428.57 = ₱2.14.

It's a credit against Kuting Kitchen's income tax. Shopee issues a BIR Form 2307 as proof; keep every one.

Entry 2: record the payout

When the money lands, it goes in the cash receipts journal. The ₱480 Shopee owed is now accounted for: cash received, the fee, its VAT, and the tax withheld.

Again, both sides equal ₱480.00, and the receivable goes back to zero.

Where each number ends up

Every line feeds a later filing. The two VATs meet on the 2550Q (₱51.43 − ₱7.71 = ₱43.72 VAT due from this order). The sale and the fee shape taxable income on the 1702Q, and the ₱2.14 is subtracted from the tax due there.

That's why every payout has to be broken down, not just booked as "cash in".