Gratuity/tips paid out in cash

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.

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

Hi Dutchie1234,

Welcome back! I'm unable to open and see the PDF you attached, kindly try to send it again. I'll by on stand-by to assist you.

I tried to reattach it earlier today, but I kept getting "authentication failed" messages.  Fingers crossed you can open it this time.

Hi Dutchie1234,

It's essential that your transactions are recorded accurately in QuickBooks, to ensure they're aligned with government guidelines.  For this reason, I recommend speaking with an accounting professional for their expertise and best course of action. If you don't have an accountant, we can help you locate a ProAdvisor in your local area. 

If you have any other questions, feel free to reach back out. We would be glad to help!