I've looked through other posts and couldn't find the answer to this:
I’m using Quickbooks online. Trying to figure out how to make entries based on the following scenario:
I pay employees a bi-weekly amount…say for example $5,000 gross (taxes are withheld).
I track the amount I’ve paid the employee over time. So say after 2 months, I’ve paid the employee approximately $20,000 gross.
When that employee closes a transaction, the company receives revenue. In this example, lets say the revenue received was $50,000.
Our agreement with the employee is to pay 50% of the revenue (minus what he’s already been paid).
So in this example, the employee earns a $25,000 commission but we’ve already paid him $20,000…so he’s due $5,000.
Trying to figure out the proper accounting for this.
The problem is if I immediately book the bi-weekly gross payroll as an expense at the time I pay it out, then my P/L isn’t truly accurate (or at least doesn’t give an accurate representation of the business). In the first month, I would have shown a $10,000 loss (I paid the employee 10K but received no revenue) when in fact I didn’t really lose $10K…it’s still “owed” by the employee.
The goal is to have a P/L that’s representative to the real financial health of the company and also to track the balance of the draws.
Seems that whenever I pay an employee their bi-weekly check, that should be a balance sheet item (asset…due from employee). That way, my P/L shows correctly (no net loss due to having no income but paying out checks) and my balance sheet shows correctly (tracks the amount due from the employee-draw).
So in our example, when $50,000 in revenue is received, I’m trying to figure out how this part of the transaction is booked. The end result is I want to show:
1. Gross sales: $50,000 (shown on the P/L)
2. Payroll Expense: $25,000 (shown on the P/L)
3. Asset item (due from employee) accurately reflects that we owe the employee $5,000
How can I accomplish this?
Thank you!
