Undistributed Tips

Thanks for reaching out here in the Community, adam73647.

I'd be glad to provide some info regarding undistributed tips in QuickBooks Online.

To start, let's create a Gratuity/Tips account for the tip and select Other current liabilities. Here's how:

1. Go to the Gear icon. Choose Chart of Accounts and then select New.
2. Choose the Detail Type that best matches the transactions you wish to track by selecting Other Current Liabilities in the Account Type field.
3. In the Name field, type Gratuity/Tip.
4. Once done, click Save and close.

Next, let's create a journal entry to transfer the credit to the Gratuity account 

1. Select the +New button and choose Journal Entry.
2. Set the date as the same date as the payment you received.
3. Select Accounts Receivable in the first line, and then enter the tip amount in the Debit column.
4. Select the customer's name from the Name column
5. Next, choose the Gratuity account on the second row and enter the appropriate amount in the Credit column.
6. When you're done, click Save and close.

Let's then use the Receive Payment option to remove the customer's credit. I'll show you how:

1. Select +New icon and choose Receive Payment.
2. Make sure the date matches the journal entry you've created.
3. Select the journal entry from the Outstanding Transactions section.
4. Next, check the box beside Unapplied Payment under the Credits field. This is the amount we're trying to move.
5. Once done, select Save and close.

Then, go to the Banking menu and see if you can find a matched  deposit there. As soon as everything checks out, you can start reconciling your account.

I'm always ready to lend you a hand in case you have any other concerns about undistributed tips. Just leave a reply below and I'll circle back to help you out. Have a good day.

I have some questions...

I already have an account for Other current Liabilities that was auto created and when the TIPs are entered through the sales receipt that is where they automatically go.

So I have the account and tips are sitting in there already. My problem is there isn't anything to actually deposit, as the deposit has already hit the account with the original sale. The sale amount and tip are included in the sales receipt and also included in the deposit. 

That's where I have the issue of this undistributed tip. The tip is distributed with payroll, but payroll doesn't grab from the undistributed account. It's like quickbooks is creating "extra."

I've re read your response several times and I just don't see how this will fix my issues moving forward. Since the deposit is already matched properly. 

I don't know if I'm explaining this correct or not. 

I can walk you through an example of a deposited check.

Had a client come in for a service. Service was $199. They left a tip of $31. The total of the check was $230.

Attached is the screen shot of the sale. 

I did a mobile deposit for the check of $230.  Second screen shot shows the categorized matched deposit of $230.

Yet, I ALSO, get $31 added to the Undistributed account. Screenshot 3. Even though when I did payroll, I added the $31 into the total tips owed. I don't have a screen shot of this, as it wasn't exactly $31, it was more because of other tips. But the money was paid out, and the debit hits my bank account, but for the entire check, it doesn't show tips. 

So that leaves me now with this imaginary undistributed amount that's already been deposited and then distributed through payroll.

Just realized I can only do one screen shot. I'll try to get them all in one. Okay, they are all in one image.

Thanks for adding details on what you want to achieve, @adam73647. I'll be your guide today. 

Since you already have an existing Other Current Liabilities account where the tips settled in, I'd recommend creating a journal entry. 

We use journal entry as a last resort to move the funds between accounts. Here's how:

1. Select the +New button, then select Journal Entry.
2. Enter the date of the transaction.
3. In the first line, select the account from the Account field where you want to debit the transactions, and then enter the tip amount in the Debit column.
4. On the next line, select the other account your moving the money to, then enter the same amount in the Credit column to make it balanced.
5. Enter the details in the memo section to know why you made the journal entry, then hit Save and close.

Should you need furhter assistance with balancing your books, I'd suggest consulting an accounting proffessional. They can guide you better on what account to use to make sure your records are accurate.

For future reference, you can turn on the tip-tracking feature on Sales Receipts to share tips or gratuities with your employees. See this article to learn more: Share tips with your team.

I'm always around to help you again if you have other concerns about recording tips, and moving money from onw account to another. Take Care!

Those steps are virtually the same as the previous response. Both of which will increase my balance in my checkbook on quickbooks if I use a journal entry to move the money from the undistributed account.

Hello,

Did you ever get this issue resolved after 1 year?  I reached out to QB for the same problem. I mentioned that this problem was all over the internet without a resolution.  What she told me to do was go into Chart of Accounts tip (current Liability account) and open register. Above the first entry line at the top, click on journal entry on the left, put nothing in the payee account leaving this blank, create a new Payroll expense account as "Tips Paid Out", then debit the amount paid out in tips in the debit column.  

Tried it but doesn't work!!!   Been on the phone with QB for 3 hours with payroll specialist and no resolution to this problem.   The journal entry does debit the undistributed tips account however the credit to the "Tips paid out expense" account creates a Negative in my P&L report.   This is really frustrating that there is no resolve by QB "experts"   

What account should I credit? I don't want to alter my payroll numbers for year end reporting by accidently crediting it to the wrong place.

What I ended up doing is making a tip income account to credit.  My accountant won’t like this since it’s not actual income but she will just have to subtract it.   This is the only way I could figure it to where it would affect the payroll wages in expenses since our tips are paid out through payroll.  Good luck since no one can help us with this issue from QB.