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Level 2

How to record accrued wages

I have a LLC where the business cannot pay the owner at this time. However the owner wants to place their accrued wages on the books so when the business can pay them, it's clearly recorded what's owed. Payroll is bi-weekly however since it's an LLC I would post wages to owner draw. So since they are not getting the wages now, I created a "accrued wages" long term liability account. Do I use vendor credit to post the wages earned there bi-weekly or do I do a journal entry? Confused please help clear up my thought process. Thanks.

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Best answer 09-18-2019

Accepted Solutions
Level 15

Re: How to record accrued wages


@ThatBkkpr wrote:

@Rustler You are correct and I do understand all the points you make. However the owner wants to record what the business cannot pay him under a category called "accrued wages" for lack of a better term to show his investor the funds owed to him too. So this is what they all want me to record with the memo "unpaid wages" which when paid I know would be posted as a draw. Do I have to do this via a journal entry or can I use the "vendor credit" function? Again, I typically place LLC owners as vendor on the books.


The problem is that there is no liability to start with, though he may want one.  In audit that would cause some questions for sure.  I expect you have tried to make him understand that all the equity is his whenever he wants it.

 

If you have to do this, have to being the key word, the only way I can see to do it is kind of hincky.

 

create the Draw due liability account, then a journal entry

debit equity draw and credit Draw due liability

when you pay "Owed wages" use the draw due liability account as the expense for the payment

View solution in original post

7 Comments
Moderator

Re: How to record accrued wages

I'd be happy to help you today, ThatBkkpr.

Helping you record accrued wages in QuickBooks Online is my priority. Let me show you how to get started.

 

To record these accrued wages, you'll need to set up the owner as an employee then pay their wages and exempt from payroll taxes.

 

Here's how:

 

  1. Select Workers on the left menu, then select Employees.
  2. Select the employee's name.
  3. Under Employee Details, click on the pencil icon beside Pay.
  4. Click on the pencil icon under the question What are (employee's name) withholdings?
  5. Scroll down until you reach the Tax Exemptions section and click on the drop-down arrow.
  6. Select the taxes the employees are exempt from. Click Done.
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This way, you'll be able to pay and record the wages for the owner. You can get more details in this article: Employee payroll tax exemptions.

 

However, I'd still suggest speaking to an Accountant. Your accountant can provide more expert advice in dealing with this concern.

 

Also, you may find this article helpful:

 

For account-related discussion, feel free to reach out to our QuickBooks Online Support.

 

  1. Sign in to your QuickBooks Online Company.
  2. Click (?) Help at the upper right corner.
  3. Select Contact US on the pop-up.
  4. Enter a brief description of your concern then hit Continue.
  5. Click Get a callback.
  6. Enter your contact information.
  7. Select Call me.

Ping me out if you need more help with payroll wages in QuickBooks. Have a good one.

Level 15

Re: How to record accrued wages

@ThatBkkpr 

 

An LLC that is NOT taxed as an s-corp
does NOT have wages or salary for the owner.

The owner takes a draw when he wishes.
The owner is responsible for estimated quarterly tax payments using IRS form 1040-ES

 

@RoseMarjorieA 

Not the first time you have pasted a stock answer that was totally wrong for the situation.

Level 2

Re: How to record accrued wages

@Rustler You are correct and I do understand all the points you make. However the owner wants to record what the business cannot pay him under a category called "accrued wages" for lack of a better term to show his investor the funds owed to him too. So this is what they all want me to record with the memo "unpaid wages" which when paid I know would be posted as a draw. Do I have to do this via a journal entry or can I use the "vendor credit" function? Again, I typically place LLC owners as vendor on the books.

Level 2

Re: How to record accrued wages

@RoseMarjorieA I appreciate your response however this works only for someone using QB payroll. And as @Rustler stated LLC owners do not collect salary per se so your answer does not fit my scenario. Thank you for your time and effort, it was appreciated.

Level 15

Re: How to record accrued wages


@ThatBkkpr wrote:

@Rustler You are correct and I do understand all the points you make. However the owner wants to record what the business cannot pay him under a category called "accrued wages" for lack of a better term to show his investor the funds owed to him too. So this is what they all want me to record with the memo "unpaid wages" which when paid I know would be posted as a draw. Do I have to do this via a journal entry or can I use the "vendor credit" function? Again, I typically place LLC owners as vendor on the books.


The problem is that there is no liability to start with, though he may want one.  In audit that would cause some questions for sure.  I expect you have tried to make him understand that all the equity is his whenever he wants it.

 

If you have to do this, have to being the key word, the only way I can see to do it is kind of hincky.

 

create the Draw due liability account, then a journal entry

debit equity draw and credit Draw due liability

when you pay "Owed wages" use the draw due liability account as the expense for the payment

View solution in original post

Level 2

Re: How to record accrued wages

@Rustler Hmmm better idea than mine thanks for your clever insight. However, I'll try to talk him out of this posting this request on the books since it truly should not be. Thank you and all the best.

Level 15

Re: How to record accrued wages

@ThatBkkpr 

 

You're Welcome

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