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Level 2

Changing payroll account preferences or settings - Accrued Vacation

Hi there. One of my clients has a weird setup for their payroll. All of the accrued vacation is going into the Payroll Liabilities line, and not its own Accrued Vacation line. I'd like to fix this. I know how to do this in QuickBooks Online, but after poking around a bit in QB Desktop, I still can't see where I can change this. I know it won't fix past pays, but moving forward it would be great to report on this properly. Where do I change payroll assigned accounts in QuickBooks Desktop? Thanks!

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Best answer July 31, 2019

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

Hello @MelissaHK ,

 

Under your Payroll Item List, go to the VacPay-Accrued item.  Open it and click Next.  Here is where you determine which G/L Account your Vacation Liability goes to, and which account your Vacation is expensed to.

 

When you change an item that affects payroll, you will get a message with options:

 

1.  Update all existing transactions to use this new account

2.  Update transactions starting on MM/DD/YY (you choose the date)

3.  Don't update any transactions (meaning it will only be applied from now on).

 

If you haven't already printed old financial statements for stakeholders to view and who don't like them to change afterwards, you can reasonably choose to update all existing transactions.

 

If you have already presented financial statements to stakeholders and they don't like changes made to the past, then you would have to choose the 2nd or third option.

 

Good luck!

View solution in original post

15 Comments 15
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QuickBooks Team

Changing payroll account preferences or settings - Accrued Vacation

Hi MelissaHK,

 

Thanks for reaching out. I'd be happy to share info on setting up Payroll Preferences in Desktop. 

 

To do this, click Lists and top of the program > Chart of Accounts and from here you can add/edit accounts. For which accounts to use, I recommend reaching out to your accountant for expert advice. Otherwise, let me know if you have questions. I'm here to help. 

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

Hello @MelissaHK ,

 

Under your Payroll Item List, go to the VacPay-Accrued item.  Open it and click Next.  Here is where you determine which G/L Account your Vacation Liability goes to, and which account your Vacation is expensed to.

 

When you change an item that affects payroll, you will get a message with options:

 

1.  Update all existing transactions to use this new account

2.  Update transactions starting on MM/DD/YY (you choose the date)

3.  Don't update any transactions (meaning it will only be applied from now on).

 

If you haven't already printed old financial statements for stakeholders to view and who don't like them to change afterwards, you can reasonably choose to update all existing transactions.

 

If you have already presented financial statements to stakeholders and they don't like changes made to the past, then you would have to choose the 2nd or third option.

 

Good luck!

View solution in original post

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Level 2

Changing payroll account preferences or settings - Accrued Vacation

Thanks James. I am a bookkeeper at a public accounting firm. I know how to use the Chart of Accounts and create new accounts. The problem is that for paycheques, all amounts for accrued vacation are going into Payroll Liabilities, grouped in with the net pay amounts. I want the accrued vacation to show up in a difference liability account called Accrued Vacation, which already exists. But I don't know how to tell QuickBooks to stop putting the amount in Payroll Liabilities and instead put them into the Accrued Vacation account. I've looked at several other clients' QuickBooks files where this works properly, but there is nothing I've found in preferences anywhere even in those correct files. I've asked all of my colleagues here, and no one knows the answer. How do I map the accrued vacation processed through paycheques to the account I want it to go to?

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Level 2

Changing payroll account preferences or settings - Accrued Vacation

Amazing, Rochelle, thanks so so so much!!

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

@MelissaHK , I should also have mentioned that you can choose the VacPay-Paid Out item's expense account.  Theoretically it should be the same as the expense account you chose on the VacPay-Accrued item.  These two items determine which expense and liability accounts will be used for all other Vacation items, i.e. Vacation Salary, Vacation Hourly Rate, VacPay-Accural Paid Out.  Hope that helps!

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Level 1

Changing payroll account preferences or settings - Accrued Vacation

What about in Quickbooks online, I cannot locate the payroll items section in online and it is accruing vacation pay on vacation pay, which is a problem

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Level 2

Changing payroll account preferences or settings - Accrued Vacation

You may need further help from someone from QuickBooks, but to access your payroll settings, click on the gear icon in the upper right corner and select the payroll settings. You should be able to view and change accounts there. I believe that works for both regular and advanced payroll. If you can't sort it out there, I might suggest posting a new thread to catch the attention of QB staff/support.

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Level 1

Changing payroll account preferences or settings - Accrued Vacation

Thank you! Yes I have been through the settings and that didnt help, I will try to contact them directly 

Cheers

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

Hi @df88 ,

 

There is much less control given to the user in the payroll setup in QBO, especially with vacation pay.  I'm sure you've been following the threads where vacation entries are not being made correctly in QBO, which hopefully will change very soon.

 

As far as calculating vacation pay on vacation pay, that is something that is probably set up in the background of QBO, where you can't access.  There are some provinces which do accrue vacation pay on vacation pay.  My province, SK, is one of them.  So if the employees you are paying in QBO are in one of these provinces, it will likely be hard coded to calculate vacation pay on vacation pay, as that is correct for those provinces.

 

See below for which provinces this is true.  What this means is that on any pay cheques where you are paying out vacation pay for time taken, those vacation hours being paid are treated like regular earnings and are also accruing vacation pay on that vacation pay, if that makes any sense.

 

Vacationable Earnings.PNG

 

 

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Level 2

Changing payroll account preferences or settings - Accrued Vacation

OK, wow, that is messed up. Vacation on vacation.

 

And thanks for the heads up. I actually haven't been following anything around vacation in QBO. None of my clients have flagged it for me to look at, so it has not been on my radar at all. I'll need to bring this up with our team here. We just converted one client from desktop to online as a trial. I'll need to make sure this isn't an issue with them.

 

It's too bad how inflexible the QBO payroll is. I actually had to have one of our QBO clients switch from Advanced to Ceridian all because there is no way to enter in an hourly rate for benefits or deductions (only percentages or dollar amounts). There are also issues with benefits, I can't remember off the top of my head if the system won't properly handle taxable or non-taxable, but it was one of them. There is even some functionality that only allows for usage if you are based in the US. I can't remember now what that was (Covid-19 isolation is brain melting), but it's a little mind-boggling how difficult QBO payroll is.

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

For this very reason I refuse to give up my desktop product, although QB is really pushing for everyone to go that way.  They've got a lot of work to do on that platform before they'll ever convince me to go that direction for myself and my clients.  On another note, QBO does do both taxable and non-taxable benefits decently, if I remember correctly.  It is all in how you set it up.

 

The Vacation Pay, on the other hand, is a complete disaster.  It makes no accrual entries to a liability and expense account.  And it only tracks hours, not $, in the background.  Yes, you can get a report showing what the supposed vacation liability is, but there is nothing tracking on your financials.  All it does is hit the wage expense account when a person actually takes the vacation, which defies the principle of accruing vacation in the first place . . . that the expense should be recognized in the period in which it is earned, not in the period in which it is taken.  The other thing that is problematic, is that it tracks hours only and translates those hours into a $ amount by multiplying by an hourly wage.  This does not address all kinds of vacation anomalies such as someone working a lot of overtime.  Just because they accrue extra vacation $ on the extra over-time pay they're getting, doesn't mean that they are entitled to any more hours of vacation.  They just get paid more for the vacation hours that they do take.  QBO currently takes none of that into account.  The same would be true if someone took vacation payouts at any time in the past; as soon as they do that, their vacation hrs and their available accrued $ no longer match.  Same again if someone has an increase in pay.  They are now earning vacation $ based on their new rate of pay.  But part of their accrued vacation $ were earned at the old rate of pay.  Now the $ and hours don't match either.

 

So the simplistic way QBO initially designed their payroll regarding vacation, is utterly impossible to work with, for Canadians anyways.  Perhaps this is a very normal practice in the US.  I know there is a lot less legislation around vacation in the US than there is here.  QBO just didn't look into it deeply enough.  Which is a total shame.  Because payroll works very well in QB desktop.  They've heard me rant about this to no end so I am trying to patiently wait until they fix it.

 

It is quite likely that you haven't heard anything from your clients because they may not even understand how the vacation accrual entries are supposed to happen in the first place.  They may just be assuming that QBO is doing it right so aren't questioning anything.  Although as soon as you look at a Balance Sheet and see no Vacation Payable, that should be a red flag. 

 

Best of luck to you!

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Level 7

Changing payroll account preferences or settings - Accrued Vacation

Hi @MelissaHK ,

 

Below is a link to a thread where I explained what must be done in QBO to account for Vacation properly, until they fix it, that is.  Unfortunately, it will require tracking vacation accrual amounts in an outside spreadsheet, as QBO ONLY calculates what it thinks is the vacation accrual based on number of hours worked.  It does NOT calculate anything based on a percentage of gross wages.  And depending on where you are in Canada, some types of wages are vacationable and some are not, as previously mentioned.

 

Once you know you have the correct calculations in your spreadsheet, you will have to make some journal entries as described in the post below.  Good luck!

 

https://quickbooks.intuit.com/learn-support/en-ca/employees-and-payroll/does-qb-automatically-enters...

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Level 2

Changing payroll account preferences or settings - Accrued Vacation

Thanks for all of this Rochelle. Very helpful and succinct.

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New Member

Changing payroll account preferences or settings - Accrued Vacation

If you've accidentally pressed don't apply to previous transaction, is there a way to get that option again? I need to update previous payroll expenses that are in the wrong expense account. 

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QuickBooks Team

Changing payroll account preferences or settings - Accrued Vacation

Hi clellan. Are you using QuickBooks Online or Desktop? Can you give me a bit more information about what you're trying to do, and where you selected "don't apply to previous transactions"?