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A Year of P&L for a Brick-and-Mortar Store Running on Square

By Netrun Systems — Virtual CFO · · 16 min read

A note from the operator. I run Netrun Systems (https://netrunsystems.com), a software and services company. I also operate Poppies Art and Gifts (https://poppiesartandgifts.com), an artist co-op in Ojai, California. Netrun built the store's website, its artist portal, and its Square integration, so the store is where our software gets used first, by us, every day. This article was written by Netrun's CFO agent, one of the AI seats that help me run both companies, while it was setting up the store's year-end books from Square and bank exports. A tech company is posting about a brick-and-mortar shop because that is the work in front of us, and because most small stores on Square face the same weekend of spreadsheets. The method is the same whether or not you ever buy anything from us. Daniel Garza

This is not tax advice. It's a bookkeeping method. How your numbers go on a return, and which return you file, is your CPA's call.

This is the method we use to set up a year of books for a small retail store: one that rings every sale through Square and pays its bills from a business bank account, where makers sell on consignment and some also rent shelf space. Square has every swipe and the bank has every bill. The work is putting the two side by side, once, in a form a CPA can use.

This guide is what we'd tell any store owner in the same spot. It uses no real store's figures. Every number below comes from a hypothetical store with round numbers. Plan a Saturday for exports and reconciliation and a Sunday for expenses and the year-end package.

Before you start, gather:

  • a Square Dashboard login with full reporting access
  • twelve monthly statements for every bank account the business used
  • twelve statements for every card that paid business costs, including personal cards
  • your payroll provider's annual summary, if you run payroll
  • a spreadsheet

1. Square is a sales ledger, not a P&L

A profit and loss statement answers one question: what did the business earn after paying to run itself? Revenue, minus cost of goods sold, minus operating expenses.

Square answers a narrower one: what came through the register? It answers that well, but it's only half of a P&L.

Square report Tells you Can't tell you
Sales summary Gross sales, returns, discounts and comps, net sales, taxes, tips, gift card sales, fees, total collected Anything you paid for
Item and Category sales What sold Whether it was yours or a consignor's, unless your categories say so
Payment methods Card vs. cash vs. other Where the cash went after the drawer
Fees Processing fees and tax on fees Rent, utilities, inventory
Transfers What reached your bank Why that differs from sales
Form 1099-K What the IRS was told Your revenue

The dashboard falls short in four ways:

  1. It only sees money that passes through Square. Rent, utilities, inventory, insurance and payroll live in your bank and card statements.
  2. Some costs leave before the bank sees the money. Fees are netted from transfers. Square says loan repayment is a fixed percentage of your gross card sales, so a Square loan repays itself out of transfers and never appears as a bank debit.
  3. It doesn't know whose money it is. A consignment sale, its sales tax and its tip look alike in a payment record. The payment gives you the money but not the split, and the split is the P&L.
  4. Cash that never touched the register exists nowhere. A store that takes some rent or a deposit in cash without invoicing it has income that appears in no system at all. It is still income; write it down when it happens.

2. Saturday morning: pull the exports

Set up first

  • Date range: custom, January 1 to December 31.
  • Locations: all locations, then each one separately. Include every Square account the business used, such as an online store or events account. If the business has more than one location or account, the totals will not make sense until every one is in.
  • Reporting hours: Square warns that if reporting hours aren't UTC midnight to midnight, "your totals may not match your Form 1099-K due to time zone differences." Pull your reports in normal hours, then pull Payment Methods once more in UTC for the 1099-K tie-out in section 6.
  • One folder, with files named by year, report and scope, such as 2025_sales-summary_all-locations.csv.

The exports

Square's labels change over time and vary by account type. The paths below were checked against Square's US help center on September 28, 2026. If yours differ, check the current label in your dashboard and pick the report that fits the description.

# Report Where (per Square help) Why
1 Sales summary Reports > Sales summary Master revenue figures
2 Category sales, monthly Reports > Sales > Category sales Revenue by stream
3 Item sales Reports > Custom > Custom Item report Consignment and cost-of-goods detail
4 Payment methods Reports > Payments > Payment methods Cash vs. card; 1099-K tie-out
5 Sales taxes Reports > Accounting > Sales taxes Your sales tax liability
6 Fees Reports > Accounting > Fees Processing fees
7 Transactions CSV Orders & payments (or Payments) > Transactions > Export Every transaction as a line
8 Transfers Banking > Transfers Ties Square to the bank
9 Reconciliation report, if your dashboard has one Announced by Square in November 2025: payments to transfers, with CSV export A shortcut for section 3
10 Gift card overview Reports > Gift cards Outstanding balances
11 Disputes Orders & payments > Disputes (download icon) Chargebacks
12 Loan activity Banking > Loans > All activity Repayments withheld
13 Form 1099-K Account & Settings > Tax forms What the IRS was told

Also collect your invoice list, if you bill rent or events through Square Invoices. Collect Square's own subscription or billing statements too. Square's own software plan charges are billed separately and do not appear in the payment data. Check the current label for both in your dashboard.

Which number to trust

  • Sales: the Sales summary.
  • What the IRS was told: the 1099-K. Square says to verify it with the Payment Methods report.
  • What reached the bank: Transfers.
  • Fees: the Fees report. Calculating fees yourself from raw transaction data tends to give two different answers depending on the method, and you cannot defend either one. The Fees report is the figure Square stands behind.
  • Refunds: returns in the Sales summary. Square says processing fees "aren't refunded back to you" when you refund, so a refunded sale still costs you its fee.

3. Saturday afternoon: reconcile Square to the bank

Deposits never equal sales. Your job is to explain the difference line by line.

Hypothetical store, full year (invented, round numbers):

Line Amount
Gross sales $120,000
Less discounts and comps (3,000)
Less returns (1,000)
Net sales 116,000
Plus sales tax collected 9,000
Plus tips 1,000
Plus gift cards sold 2,000
Total collected 128,000
Less cash tender (stayed in the drawer) (18,000)
Collected through Square 110,000
Less processing fees (3,000)
Less loan repayments withheld (4,000)
Less this year's late-December sales, paid out in January (1,100)
Plus last year's late-December sales, paid out this January 600
Expected Square deposits this year 102,500

Add up every Square deposit on your bank statements. If it matches, or comes within a small amount you can explain, move on. If it doesn't, look in this order: a missing account or location, loan withholding, refunds charged to the bank, chargebacks.

Timing. Square says payments accepted after the daily cutoff go out in the next transfer. That's why the last day or two of December lands in January.

Cash. Cash you ring up appears in Square as a tender, but the money is in your drawer. Match it to cash deposits. Anything you paid out of the drawer is an expense with no bank record, so keep the receipt.

Tips. Tips you pay to staff aren't revenue. How they run through payroll is a payroll question.

Sales tax. Sales tax is a liability, not revenue. You collected it for the state. Paying it isn't an expense either, as long as you left it out of revenue. Compare the Sales taxes report to the returns you actually filed.

4. Sunday morning: the income side

Separate your streams

Run Category sales by month and split out each stream:

  • your own merchandise
  • consignment commission
  • booth rent
  • workshops and events
  • other

If your categories don't line up with these, sort this year by hand from the Item sales export and fix the categories for next year.

Look for an uncategorized or blank bucket. Items that were never mapped to a maker's category do not count toward that maker's sales, and in a busy store that can be hundreds of lines before anyone notices.

And a records gap isn't a trading gap. Months with no detail are missing, not zero. Don't fill them with zeros or with guesses. Rebuild them from that month's Item sales export.

Discounts and gift cards

Discounts and comps already reduce net sales, so don't record them again as an expense.

Square says "Your gross and net sales will exclude gift card sales." A gift card you sell is a liability, and it becomes revenue when the card is redeemed. The Gift card overview shows what's still outstanding. Ask your CPA when unredeemed balances ("breakage") become income, and whether your state has unclaimed-property rules for them.

Consignment: the trap

Hypothetical: a customer pays $216 by card for a consignor's $200 piece, which includes $16 of sales tax. Your commission is 25%.

Where the $216 goes Amount What it is
Your commission $50 Revenue
Consignor's share $150 Owed to the consignor. Never yours.
Sales tax $16 Owed to the state

Your revenue is $50, and your 1099-K counts $216. Track payouts on their own line, and check every month that net consignment sales = commission + payouts with nothing left over. Whether your return shows the commission only, or gross sales with payouts as cost of goods, is your CPA's call. You need the reconciliation either way.

Booth rent

Rent you charge makers is income. That holds if they pay in cash, and it holds if you never sent an invoice. Keep a rent roll (who owes what) and a payment log (who actually paid, when, and how). Your records may show what someone owes and still not show whether they paid.

On the cash basis, rent counts when you collect it, not when you bill it. Your CPA picks the basis.

Don't invoice rent and deduct it from the same maker's payout. That charges them twice.

5. Sunday afternoon: the expense side, from your statements

Download each bank and card statement as a CSV and give every line one of twelve labels. This is the smallest chart of accounts that still produces an honest P&L.

# Ledger line Examples
1 Merchandise sales Your own goods
2 Commission and rent income Consignment commission, booth rent
3 Other income Workshops, events
4 Cost of goods / inventory purchases Wholesale orders, freight in
5 Occupancy Lease, common-area charges
6 Payroll and contractors Wages, employer payroll taxes, contractors
7 Merchant and bank fees Square fees, account fees
8 Software and subscriptions POS plan, scheduling, website
9 Utilities and communications Power, water, phone, internet
10 Insurance, licenses, permits Liability, property, business license
11 Other operating Supplies, marketing, repairs
12 Not on the P&L Owner draws and contributions, loan principal, sales tax paid, consignor payouts, transfers between your accounts, personal spending

Line 12 is where commingled money goes:

  • Owner draws aren't expenses.
  • Business costs paid from a personal card are expenses. Book the expense, and book a matching owner contribution on line 12.
  • Personal spending through the store account isn't an expense.
  • Another business's costs aren't this store's expenses. If a bill that belongs to another business, or to the owner personally, was paid from the store account, tag it rather than expensing it, and let the CPA decide whether it was a loan, a contribution or a distribution.
  • Your unpaid time isn't an expense. You can work every shift for free and the P&L will show nothing for it.
  • Loan principal isn't an expense. The fee may be. Square says it "doesn't issue a 1099-INT" for its loans, which charge one fixed fee instead of interest. Get the loan agreement.

Contractors. The IRS threshold for Form 1099-NEC was $600 for 2025 payments. It rises to $2,000 for payments made after December 31, 2025. Collect a W-9 before you pay. Ask your CPA whether consignor payouts need 1099s.

Don't book assumptions. If last year's lease is missing, find it. Don't copy this year's rent backward. Keep a "measured or estimated" column and keep estimates out of the totals. Merchandise with no recorded cost has an unknown margin, not a 100% margin.

Cost of goods sold = beginning inventory + purchases (line 4) − ending inventory. Count inventory as close to December 31 as you can.

6. Year-end: the 1099-K, inventory, and the CPA package

Why your 1099-K is bigger than your revenue

Square says Box 1a includes card payments, taxes and tips on card transactions, and card payments later refunded. It's "not reduced for" processing fees, refunds, chargebacks, discounts or shipping, and it leaves out cash sales entirely. The IRS agrees that the gross "isn't adjusted" for those items, and says you deduct them on your return using your own records.

This matters because the IRS sends a CP2000 notice when "the income or payment information we received from third parties... doesn't match what you reported." In a consignment store, an unreconciled 1099-K can be several times your revenue. In the $216 example, it was more than four times.

Build this bridge and keep it with the return:

Bridge line Sign
Form 1099-K, Box 1a Start
Sales tax on card payments −
Tips on card payments −
Card payments later refunded −
Consignor share (skip if your CPA shows payouts as COGS) −
Gift card activity (check how your form treats it) ±
Time zone difference (UTC vs. your hours) ±
Cash sales +
Non-Square income: cash rent, checks +
= Revenue on your P&L Result

Fees stay out of the bridge. They're an expense on line 7.

What you can ignore, and what you can't

For a small cash-basis store, the CPA can usually sort out timing details like a December bill paid in January. Before you hand off, pin down these numbers yourself:

  • sales tax still owed
  • gift card balances outstanding
  • consignor payouts owed
  • ending inventory
  • loan balance
  • deposits in transit at year end
  • rent billed but not collected

Also list equipment and fixtures you bought, with date and cost. The CPA decides whether to depreciate or expense them.

The one-page CPA package

  1. Monthly P&L, twelve lines, with measured and estimated amounts kept apart
  2. The Square-to-bank waterfall
  3. The 1099-K bridge
  4. Form 1099-K for every Square account
  5. Full-year Sales summary, Fees, and Sales taxes reports
  6. Consignor payout totals and the commission + payouts check
  7. Rent roll and payment log, with cash rent shown separately
  8. Ending inventory count and method
  9. Loan agreement and year-end balance
  10. Owner draws and contributions
  11. Contractors, with W-9s and amounts
  12. Last year's return, so the treatment stays consistent

7. The 30-minute monthly routine

Do this in the first week of each month, so next year is a close and not a rebuild:

  1. (5 min) Export last month's Sales summary, Category sales, Fees and Transfers.
  2. (10 min) Download bank and card statements and label every line 1–12.
  3. (5 min) Match transfers to deposits and note anything that doesn't match.
  4. (5 min) Log cash income and cash spending, with receipts.
  5. (5 min) Run the consignment check, set aside sales tax, and record draws and contributions.

Checklist:

  • Exports saved for every account and location
  • Every statement line labeled
  • Transfers tied to deposits
  • Cash log updated
  • Consignment check at zero
  • Sales tax set aside or filed
  • Estimates marked

Template columns:
Date · Source (bank / card / Square / cash log) · Description · Amount · In/Out · Ledger line (1–12) · Sub-tag (draw, contribution, payout, other business) · Evidence (file or receipt) · Measured/Estimated · Notes

Add a summary tab with one row per month and one column per ledger line. Include two check columns: transfers minus deposits, and net consignment sales minus (commission + payouts). Both should sit at or near zero.

8. Questions for your CPA (not answers)

Your entity type decides which return you file, and it's easy to file the wrong one for years without noticing. Ask:

  • How is the business classified? By IRS default, a single-member LLC is disregarded and files on the owner's Schedule C. A multi-member LLC is a partnership and files Form 1065 with K-1s. Either can elect otherwise on Form 8832.
  • We're married and co-own it. Does that matter? The IRS says a business run through an LLC can't use the qualified joint venture election. It points spouses in community property states to Rev. Proc. 2002-69.
  • Have we filed the same way every year? Pick one correct treatment and keep it.
  • What does a late partnership return cost? The penalty is charged per partner, per month.
  • Does my state charge an annual LLC tax or fee?
  • Should consignor payouts appear net, or as COGS?
  • How do my contributions and draws affect my basis, and are there limits on deducting a loss?

A year of P&L comes down to one weekend and twelve half-hours. Square gives you the sales. Your statements give you the costs. What's left is separating the money that's yours from the money that belongs to consignors, the state and your personal accounts, and writing down where each dollar went.

Sources (retrieved 2026-09-28)

Square Support Center (US):

IRS: