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windylou
Level 4

Employee Withholdings for Lost Tools, etc?

My question isn't really a Quickbooks question, but more of an accounting one. We have signed agreements with each employee that if they lose or damage tools, it can be held out of their checks, along with uniforms if they aren't returned at termination. When I withhold the amount on the check, the payroll item is just called reimbursements & it goes through a clearing bank. My question is what do I credit to counteract my debit to the clearing bank as well? For example, $5 withheld from paycheck through reimbursement item, credits clearing bank. Then I make a journal entry to debit the clearing bank, but what am I crediting? Would it be an inventory asset? I'm fairly certain it would on this particular tool, but not others. What about the uniforms? Technically they were expensed when paid for, correct? Any insight would be appreciated.

5 Comments 5
BigRedConsulting
Community Champion

Employee Withholdings for Lost Tools, etc?

The deduction(s) you use for this probably should not use a bank account, but instead a sort of contra-expense or income account/accounts similar to the account you'd use to buy the things they are being penalized for. Or perhaps even the same expense account used for those purchases.

 

So for example, if you're deducting for a tool that was lost or broken, you might use the same tools expense account you use to buy tools.  This will reduce your tools expense on the P&L.

windylou
Level 4

Employee Withholdings for Lost Tools, etc?

The clearing bank is simply that. It is just used for clearing things so that I don't have a hundred different payroll items set up. Sometimes I reimburse employees for purchases made in the field, etc. There's just a wide range & that keeps my payroll clean. I suppose you did answer my question though. I do expense when I purchase an item & if we're reimbursed for said item, we wouldn't need the expense.



 

BigRedConsulting
Community Champion

Employee Withholdings for Lost Tools, etc?

Yes you can make it a two step process like you describe, which makes sense if you'd otherwise actually have to create 100's of payroll items.

john-pero
Community Champion

Employee Withholdings for Lost Tools, etc?

When you deduct from the employees for items already purchased I would treat that as a misc income or contra expense and would not break it down any further. Tools and uniforms being used on a regular basis should not, in my opinion, be inventory. As with customer billable expenses, as my CPA is teaching me, the billable should result in an income entry as well as an expense but not to the same account. It is still a wash but I have been cautioned to show both amounts in my P&L

 

windylou
Level 4

Employee Withholdings for Lost Tools, etc?

I get what you're saying. However, ours are inventory as they are also items we sell. Typically, I expense them through supplies, tools, etc when issued to an employee and also make the adjustments to remove them from inventory. That makes perfect sense to create it as a miscellaneous income, so I've done this. Thanks so much!

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