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Dutchie1234
August 21, 2024
Question

Gratuity/tips paid out in cash

  • August 21, 2024
  • 1 reply
  • 0 views

We run a small family owned and operated business and I currently use Quickbooks Desktop. I don't use Quickbooks Payroll at this time.

I create separate sales receipts for cash/credit/check sales. The daily POS cash reconciliation credit/debit/check totals sometimes include gratuity/tips and these totals (including gratuity/tip amounts) are deposited into our bank account. However, our POS is currently set-up to do a gratuity cash out register adjustment, which converts debit/credit card gratuities/tips to cash and reduces our daily cash income by the total amount of gratuity/tips for that day (sometimes our gratuity/tips totals are higher than our cash income). The cash tips are then distributed as follows: i.e. MasterCard total deposited to bank account = $1,075.00 (MasterCard sales: $1,000.00; Gratuity/tips: $75.00); Controlled tips paid out in cash to employee: $25.00, Direct Tips paid out in cash to employee: $25.00, and the remaining $25.00 cash goes to the employer as business income. I'm trying to figure out how to record all of this properly, including the controlled tips that were paid to our employee in cash but have to be reflected on her paycheck.

1 reply

M
MJ_R
August 21, 2024
This post has been deleted.

Hi Dutchie1234,

 

Welcome to the Intuit Community! I'll be happy to provide some information about handling tips in QuickBooks Desktop.

 

Here are some steps to properly record gratuities/tips and their distribution in QuickBooks Desktop:

 

Step 1: Record the Sales Receipt

Create a Sales Receipt:

  • Go to Customers > Create Sales Receipts.
  • Enter the total amount received (including sales and gratuities/tips).
  • For example, if the MasterCard total deposited is $1,075.00, enter this amount.

Itemize the Sales and Tips:

  • Add an item for the sales amount (e.g., $1,000.00).
  • Add a separate item for the gratuities/tips (e.g., $75.00).

Step 2: Record the Bank Deposit

  1. Make a Bank Deposit:
    • Go to Banking > Make Deposits.
    • Select the sales receipt you just created.
    • Ensure the total deposit amount matches the bank deposit (e.g., $1,075.00).

Step 3: Record the Cash Out for Tips

Create a Journal Entry for the Cash Out:

  • Go to Company > Make General Journal Entries.
  • Date the journal entry for the day the tips were paid out.

Debit and Credit Accounts:

  • Debit the Tips Payable account for the total tips paid out (e.g., $75.00).
  • Credit the Cash on Hand account for the same amount.

Step 4: Distribute Tips to Employees

  1. Create a Check for Each Employee:
    • Go to Banking > Write Checks.
    • Select the Cash on Hand account.
    • Enter the amount of tips paid to each employee (e.g., $25.00 for controlled tips and $25.00 for direct tips).
    • Use the Tips Payable account for the expense category.

Step 5: Reflect Tips on Employee Paychecks

Set Up a Payroll Item for Tips:

  • Go to Lists > Payroll Item List > New.
  • Follow the prompts to create a payroll item for tips.

Add Tips to Employee Paychecks:

  • When processing payroll, add the tips to the employee’s paycheck using the payroll item you created.
  • Ensure the tips are taxed appropriately.

Example Journal Entry

  • Debit: Tips Payable $75.00
  • Credit: Cash on Hand $75.00

Example Check for Employee

  • Account: Cash on Hand
  • Amount: $25.00
  • Expense Category: Tips Payable

 

By following these steps, you can accurately record and distribute gratuities/tips in QuickBooks Desktop, ensuring that everything is properly reflected in your financial records.

 

I'll be here if you have other questions. Let me know in the comment section and I'll be happy to back you up. Have a wonderful day.

D
Dutchie1234Author
August 23, 2024
 

Hi there!  Thank you so much for your help.  I do have a few questions.  See attached pdf.

 

 

 

 

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