We collect tips and distribute paycheck tips once deposited. Although a tip amount is on paycheck, the undistributed tips owed is unchanged. Journal entry required?

Hello RonDecantWinery,

There are a couple of ways on how to record paycheck tips. One of them is by creating a deposit then creating a journal entry. To make sure where on the same page, I'll share the steps how to offset the tip amount from the Undistributed Tips account.

Step 1: Record the collected tips:

1. Click on the Plus icon and choose Receive Payment.
2. Choose the customer name.
3. Select Undeposited Funds as the Deposit to account.
4. Click on Save and close.

Step 2: Create a journal entry:

1. Click on the Plus icon and choose Journal Entry.
2. In the first line item, choose Undistributed Tips and put the amount out to the employees in the Debits column. 
3. In the second line item, choose Undeposited Funds and put the same amount in the Credits column.
4. Click on Save and close.

Step 3: Record the deposit:

1. Click on the Plus icon and choose Bank Deposit.
2. Select the original payment and the journal entry; this will reduce the total by the amount of the tips you paid out.
3. Click on Save and close.

I've got you an article for more options: How to Record a Tip and Add Tips on the Employee Paycheck.

We'll be glad to see you coming back for more questions.