Question

Setting up account properly to account for tips

Forum|Forum|7 years ago
January 2, 2019
3 replies
0 views

I own a restaurant. Every day I run a sales report. I enter the sales receipt into quickbooks. Food , Liquor, Beer. Everything is noted as cash drawer. When the credit cards settle the next day they go into my bank account. I use the cash drawer as the account that the funds come out of. Problem- How do I account for credit card tips? Example- $200 in sales goes into "cash drawer". Credit cards settle the next day- $100 payment + $50 tips. but I paid those $50 to staff already so how do I account for them?

QuickBooks Self-Employed

J

joanspruill

You could set up a current liability account for tips collected. It will basically be a clearing account for the tips. When you pay out the tips from your cash drawer record it as a debit to the tip liability account. When you received the credit card payments record the tips as a credit in the tip liability account. If the account has a balance in it, it means that either you haven't paid out all the tips or your haven't collected from the credit cards yet.

The tips don't affect your profit or loss, but you need to track them for each employee to report properly to the IRS.

S

Shannon Lam

Once the tips are in the liability account, how are they handled through payroll? The company I am working with pays out the credit card tips each night so the payroll is just reporting the tips in, so they are taxed, and then tips out, as they were already paid to the employee. Both the Tips In and Tips Out items are set to post to the same expense account so it zeros out each week. How do the tips that were posted into the liability account zero out?

Tori B

Hi there, @Shannon Lam.

Thanks for following the thread. I'm happy to provide some information about handling tips in QuickBooks Online Payroll.

First, you'll need to figure out what type of tips you're going to record in QuickBooks. Rather you gave your employee tips directly through cash or if you've added them to your employee's paycheck. If it's cash, this would be considered a Cash tip. If it's added on a paycheck, this would be a Paycheck tip.

To help determine what type of type you've provided to your employee, check out Cash tips Vs. Paycheck tips.

Please note: It's always best to consult with your accountant before recording tips in QuickBooks. Your accountant will know what's best for you and your business. If you don't have an accountant, don't sweat it. You can find an accountant here in our Resource Center.

I've included some steps below that cover recording tips for your employee in QuickBooks below.

Go to Payroll on the left pane menu.
From the Employees tab, pick the name of the employee.
In Employee details, hit the Edit icon next to Pay.
Within the How much do you pay section, choose Cash Tip or Paycheck Tip.
Then, Done.

For additional details, take a look at About tips and paychecks.

Feel free to let me know if you have further questions or concerns. You can always reach out to the Community. We're here for you every step of the way. Take care and have a great weekend!

A

Anonymous

Hi,

Many people handle this by recording the total credit card charges (including tips) and the net cash (cash sales MINUS paid out credit card tips) on their daily sales entry.

This has the bonus of making your credit card deposits reflect your deposits to the bank (usually) AND the cash hitting your cash on hand or safe account being the actual cash you are supposed to have collected at the end of the night.

Typically, people who use this method (myself included) are recording tips by employee elsewhere and a part of the nightly cash-out process and tip-share/tip-out process.

Kristen Nies Ciraldo

T

Tvnews

Hello, in an self employ how do I find my company I’d?

MJoy_D

Let me share some information on how to get your company ID, @Tvnews.

You can get your company ID from the payment receipt that you'll be receiving from Intuit every month for your subscription.

That'll be sent to the email address associated to your QuickBooks Self-Employed account.

For other concerns about your account or anything else, let me know by leaving a comment below. We're always here to help. Have a good day!

M

machodoccreekmar

I have a small marina and the dock ladies sometime get tips added to CC charges. They show up in QBO as "undistributed Tips" in a liability account. I would like to pay them out in cash. What is the best way to get this done.

Thanks,

Jeff

JasroV

Hope you’re having a great day, @machodoccreekmar.

I can guide you how to get it done in your QuickBooks Online (QBO) account. You can create a check using the liability account to pay the dock ladies for their tips. Let me guide you through the steps.

In your QBO account:

Click the + New menu.
Select Check.
Choose the Payee from the drop-down list.
Select the liability account from the Bank Account field.
Complete the check fields.
Enter the total amount of the tips under the Amount column.
Select the Print or Preview option if you want to print the check.
Once done, click Save and close.

You can also refer to this article for the detailed steps: How to write checks.

In case you need to link a deposit to your invoice, feel free to check this link that provides detailed information on how to do it in your QBO account: How to link a deposit to an invoice

Please let me know if you have other queries, I’ll be more than happy to assists you. Have a great day!

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