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Experienced Member

When I switched over from Sage 50, I used to have a Vacation Balance liability account that kept track of accrued vacation pay. Where is that in QuickBooks?

How does QuickBooks account for vacation accrual and is this show as a liability amount?
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Best answer 05-01-2019

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QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Thanks for confirming. Vacation accrual is accounted as an expense in QBO. It won't show as a liability amount with Standard Payroll. Let me know if you have further questions. 

 

19 Comments
QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi there, 

 

 

You've reached the right place for help. I'd be happy to share more info about vacation accrual in QBO. 

 

I want to make sure I give you the correct info. Are you using Standard Payroll or Advanced Payroll? 

Experienced Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

I am using standard payroll.

Highlighted
QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Thanks for confirming. Vacation accrual is accounted as an expense in QBO. It won't show as a liability amount with Standard Payroll. Let me know if you have further questions. 

 

Experienced Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Good to know, thanks.  So just to confirm, vacation accrual will be charged every payroll to my Wage Expense Account (how it was defined in my Payroll Account Preferences)?

QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

No worries. Vacation accrual will only be affected if you pay it out and this will affect your Wage Expense Accrual. Feel free to ask questions. 

Community Explorer **

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi James,


I too am switching over from Sage 50 and want to make sure I understand things correctly.

You say that with Standard Payroll, QBO will not show Vacation accrual as a liability and if I understand correctly, is shown as a wage expense as it is paid out.

How then do I account for and track the outstanding liability (i.e. the amount the company is legally obligated to pay at some point) of outstanding unpaid vacation accrual?
It's a line item, with a balance, in my current chart of accounts.  Do I have to manually adjust it with a general journal entry?

Or do I need to upgrade to something other than Standard Payroll, for complete accounting of vacation accrual?


QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi Michael,

 

QuickBooks Online offers reports which allow you to track vacation pay accrued and paid out to employees. If you're looking to do this, here are the steps: 

 


    1. From the Reports menu, select Employees & Payroll > Payroll Liability Balances.
    2. Click Customize Report.
    3. On the Filters tab, under the Filter section, select Payroll Item, then from the Payroll Item drop-down, click Multiple payroll Items
    4. On the Select Payroll Item screen, select the following payroll items:

  •         Vacation Salary (if used)
  •         Vacation Hourly Rate (if used)
  •         VacPay-Accrued
  •         VacPay-Accrual Paid Out

    5. Click OK.
    6 From the Display tab in the Modify Report: Payroll Liabilities Balances screen, change the selection for Display columns by to Payroll Item Detail.
    7. From the Header/Footer tab:

  •         change the Report Title to "Vacation Pay Owing"
  •         change the Company Name to the Employee's Name

    8. Click OK.
    9. To memorize the report for future reference, click Memorize > OK.

 

I want to make sure I'm on the same page as you. What's the reason you'd like to adjust the line item? 

 

Let me know if these steps help. Otherwise, feel free to ask questions, I'm here to help.
 

Community Explorer **

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi James,

I am trying to setup my existing Chart of Accounts in QBO and understand how I need to adapt my processes so that I maintain consistent records of payroll.  
Currently chart of accounts has an individual account for "Vacation Payable" which gets sub-totaled into "Current Liabilities" on my balance sheet.
Sage 50 automatically credits and debits this account as payroll is processed.
If understand you correctly, the standard payroll *does not* automatically debit and credit transactions for Vacation Payable in a G/L account.

My question is whether I have to generate those transactions manually, or if there a way to set it up automatically so that I can maintain an accurate balance sheet consistent with my historic chart of accounts.

QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Thanks for elaborating more on this. At this time, Standard Payroll doesn't automatically debit the transactions. A workaround to this would be manually recreating this process by creating a liability account. Once you've created the liability account, you can map it with your vacation pay by clicking the gear icon > Payroll Settings > Accounting > from here you'll see the pay type Vacation pay > map the Vacation Pay to the newly created liability account. Every time you run payroll, vacation pay will be hitting the liability account. Let me know if you have further questions. 

Experienced Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Your suggested solution is exactly what I was hoping to find, however there is no pay type, "Vacation Pay" list on this page.  I see the following:

  • Bank Account
  • Wage Expense Accounts
  • Tax Expense Accounts
  • Tax Liability Accounts

Is there another work around?

QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

I see what you mean. Once you're on the Accounting Preferences page, follow these steps:

  1. Select the Customize button
  2. In the Wage Expense Accounts section, set the radio point to "I use different accounts for different wages". This will expand the list of pay types and wages and allow you to customize each one individually.
  3. Map your accounts accordingly
  4. Select OK

Let me know how that works out for you.

Experienced Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

OK, I see how this now opens up the flexibility to customize my expense accounts, however it is restricted to only expense accounts.  The drop down menu only shows me my expense accounts to choose from.  My vacation owing balance is a liability account.  It does not show up in this drop down menu nor do I see a way to expand that list to see all of my G/L accounts.  Any suggestions on how to expand this drop down list to view my liability accounts?

QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi dwoytas,

 

I'd like to clarify how vacation works in QuickBooks Online Standard Payroll. Reading through this thread, I see there's been some confusion with the instructions and not all of them are for Standard Payroll, which is why you and other users are not seeing all the options that have been outlined.

 

When using Standard Payroll, QuickBooks Online's vacation accounts aren't visible in the Chart of Accounts and don't have as many mapping options to help you see them. What WassimO mentioned for the expense accounts is a great idea, but there aren't any liability accounts that you'll see in the Chart of Accounts. Instead, vacation calculations can be seen by taking the following steps.

  1. Click Reports from the left menu.
  2. Scroll to the Payroll section.
  3. Click the Vacation and Sick Leave report.
  4. Choose from the drop-down Employee menu to see Active, Inactive, All, or individual employee information in the report.
  5. Click Run Report (Note: the default is to show all Active Employees, so you won't need to hit Run Report if this is the information you'd like to see).

Now you'll see the accrued vacation for your employees.

 

To learn more about how QuickBooks Online Standard Payroll works when it comes to vacation, I recommend checking out the following thread, where I had a back-and-forth with another customer about how vacation works in Standard Payroll and how the Chart of Accounts is affected. Feel free to read the entire thread, but I've linked to where the conversation with the user I mentioned begins: How do we accrue Vacation Pay by percentage instead of fixed hours? I know the title of the question may not seem like it relates, but I'm certain you'll find the information you need here.

 

Let me know if you have more questions about Standard Payroll!

Community Explorer **

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Hi Laura,

Thank-you for that clarification. 
I am migrating over from Sage 50 and have a Vacation Accrued liability account with an active balance (that is a total of the outstanding vacation accrued by all employees).  If " there aren't any liability accounts that you'll see in the Chart of Accounts." for Standard Payroll, where does that balance show up in the Chart of Accounts?  
While it is extra-work to have to run an additional report to see my Vacation Pay liability, I still need to know where to put (or where Quickbooks puts) the existing balance on the account so that my books between Sage (old) and Quickbooks (new).

Is there a Payroll Option that does show the Vacation Pay in the Chart of Accounts.  It seems like an odd thing not to allow.

QuickBooks Team

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

I hear what you're saying about making sure your books are balancing post-migration. The vacation balances, however, won't show in any account in the chart of accounts. All the calculations are done behind the scenes in the program and show up on the Vacation and Sick Leave report for you to see.

 

The Advanced Payroll option does give you the option to map your Chart of Accounts and will show you the payroll vacation broken down into liability and expense accounts. Learn more about that here:  How to map the chart of accounts before running payroll

 

The Standard Payroll option is more basic, so if you'd like to get into more detail, I recommend considering Advanced Payroll. Here's a nice side-by-side comparison chart that outlines the different options: Standard and Advanced payroll features

 

If you'd like help going over your numbers post-migration, our phone support team can help you out. Don't be afraid to give them a call at 1-855-253-1536. Agents are available from Monday to Friday between 9 a.m. and 8 p.m. EST and Saturday from 9 a.m. to 6 p.m. EST. We absolutely appreciate that you've chosen QuickBooks Online to continue managing your business finances and are here to help make sure you get set up and back to business.

Active Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

This answer does not make any sense, how can you have an expense for something that hasn't yet been paid without an offsetting credit to an accrual account?  ie. Debit Wage Expense, Credit Accrued Vacation Pay.  It only expenses the vacation pay when it is paid out to the employee.  The system keeps track of what is owed to the employee but does not make an entry for the amount of the vacation pay owing to the employee.

Experienced Member

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

I agree with Debbie.  You can't magically pull money from nowhere.  Each payroll, the employee accrues vacation pay, which needs to be tallied in a liability account (vacation accrued).  When an employee take a vacation day, they are paid out of that liability account for that day's worth of wages.  Which account gets credited when you pay someone for a vacation day?  You say that Quickbooks keeps track of vacation accruals in the background, why can't it keep track of it in the forefront, in a liability account as it should be?

Established Community Backer ***

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...

Here is the bottom line.  QBO currently does not accrue vacation as a liability nor record it as an expense.  It tracks time only and allows you to see how much time has been accrued in a report and the vacation is expensed at the time it is paid out to the employee.

 

I discovered this in a very long and drawn out correspondence with Intuit after testing QBO extensively and determining that it is not making any financial entries for the vacation accrual whatsoever.  And weirder still, they didn't realize it until I brought it to their attention.  I'm still at a loss as to how this major issue has been overlooked in QBO, especially considering that QB Desktop has had this capability for years.  In trying to make QBO for the masses and simplifying it, they oversimplified and this major payroll issue is completely missing in QBO.  Apparently it is now slotted to be available in the near future.

 

Advice I gave another poster on this topic:

 

Re: Does QB automatically enters the accrued vacation for every pay period in the balance sheet as Wages Payable/Accrued Wages?
 
 

Hello @norly ,

 

Until QBO incorporates this essential functionality re: Vacation Payable, you can use QBO's vacation reports to get the numbers you need to make the JE yourself.

 

DR Vacation Expense (vacation earned/accrued in the period)

CR Vacation Liability (same amount as Vac expense)

 

Since QBO automatically debits the vacation expense at the time someone takes their vacation, you will have to make the following entry to ensure that vacation expense isn't recorded twice, and vacation liability (from above entry) is reduced:

 

CR Vacation Expense (to offset the automatic DR QBO makes when paying out vacation pay)

DR Vacation Liability (to reduce the liability by amount of vacation taken)

 

Good luck!

Established Community Backer ***

Re: When I switched over from Sage 50, I used to have a Vacation Balance liability account that k...