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Frequent Explorer *

How to write a check that clears a Current Liabilities account

Hi all. I have 3 accounts that are 'Current Liabilities' where I collect the sum that I need to pay them from sales. (these are their royalties/commissions) I'd very much like to write each of them a check but I'm not sure what I'm doing.

 

First off, they're not listed as employees. Secondly, I'm using QB 2014 so a very old version.

 

So, I've opened my check register, picked one of the artists (that I technically have listed as a vendor) and this is what I'm after:

1. I want the money to come out of checking, of course a

2. I want the Current Liabilities account to zero out

3. I want the payment to show in COGS account 

 

I have no idea what I'm doing - just writing the check doesn't seem to make anything work like I think it will. The pic shows the liability account and in the part where the check is being written, it's the COGS account in the expenses area. Can someone guide me a bit here? 

 

Thank you in advance!

4 Comments
QuickBooks Team

Re: How to write a check that clears a Current Liabilities account

Hello there, @mische7.

 

I'm here to help share some ways

 

In QuickBooks, COGS are accounted automatically. These are generated from the inventory items. When creating a bill using the inventory item, it'll have the COGS calculated and the liability as accounts payable. When you pay the bill, a check is generated which zero out the liability.

 

If you have a liability balances, you can write a check to that liability account to zero it out and create a journal entry to generate a COGS.

 

With this, you have to seek assistance with an accountant to know what account to use when creating a journal entry.

 

To learn more about creating a journal entry in QuickBooks Desktop (QBDT), you can check this article: Create a journal entry in QuickBooks Desktop.

 

I'm also attaching our help articles in case you have any other QuickBooks concerns in the future: Help articles for QuickBooks Desktop.

 

Keep in touch if you have any other QuickBooks questions, I'm just a post away to help!

Frequent Explorer *

Re: How to write a check that clears a Current Liabilities account

Hey there - thanks so much for jumping in!

 

Hmmm. My accountant set this up for me. (quite some time ago and we're not working together anymore) I'm concerned this may have been done a bit backwardly.

 

So this is what I have so far --

Each of them (3 artists), as a vendor, was mapped to their Royalties COGS account. When I wrote each of them a check, the total showed up in COGS. But, the Royalty holding account (a liability account) didn't clear. That may have made sense to the accountant. She probably knew what to do from there.

 

So the good part now is that the checks are written and the holding accounts are clear, which is great. I did this by changing the account the check went to by default for each of them.

 

That said, now I'm just stumped on recording this in the royalty COGS account. I attempted a couple of journal entries but made a mess of things so I removed those.

 

I have QB 2014 Accountant. Is there a certain special type of entry I can make that will leave the checking account alone and also add the sum to the COGS account?

 

This might have been easier if we'd set these up more like the merchant fees are done and I would just reconcile the accounts now. That works great in letting me pay things and seeing the sum also tallied in the cog account. But, we didn't set it up that way..

 

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Established Community Backer ***

Re: How to write a check that clears a Current Liabilities account

Ideally what you would want to create is that the COG appears at the same time as the sale occurs. The COG can be created by QB if the item sold was 'inventory', or manually if the item was non-inventory, or if there was no 'item' at all.  The COGroyalty is due to the artist - so the entry upon sale goes into the account you are now clearing - and the payment then clears it.

 

So your problem/issue is not how to clear to that liability, but rather how and when the COG was created - that must have already happened otherwise there would be no liability.

You seem to think there's something wrong - buts that not clear to me. Just issuing the check and clearing the liability is fine as far as balance sheet is concerned.  I think your problem might simply be timing the entry of COG on the P&L statement - and that revolves around the sale entries.

Frequent Explorer *

Re: How to write a check that clears a Current Liabilities account

I appreciate your response. I imagine you're exactly right. I have a certain idea of how I should see things in here and get boggled easily when I don't. Ultimately, it's not a lot of money and I'm happy as long as I know the artists have been paid.

 

Thanks again for everything. Have a great afternoon -

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