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Level 1

Take money from contractors pay and store for later to pay rent

I need to create an account to hold funds from a contractors pay to pay for their rent/utilities later. The contractor works for us and also rents out a house that we pay someone else for. I need to collect like $300 per check to pay rent, I need an account to put this in and then need to withdraw from that to pay the rent. Would this be a liability account?

2 Comments
Level 15

Take money from contractors pay and store for later to pay rent

No it would be an asset type account

 

write the check to the contractor for the full amount, then on the next line select the asset account and enter the rent amount as a negative number

Community Champion

Take money from contractors pay and store for later to pay rent

On the contrary, deductions from employee or contractor payments are, in my view, always liabilities to the company.

 

If you deducted for taxes (in our state we must withhold our state income tax on out of state contractors) or supplies, tools, uniforms, etc it is a liability that is paid later. You are passing this rent through AT COST (if you profit at all in the transaction then i feel the entire deduction might be  income to you and expense that you pay)

 

I would prefer the deduction be a current liability with the lessor being the payee and when you pay the lessor the liability is reduced. Cionsider the case where you deduct one payment too much as the contractor has moved out and you did not realize or forgot. Absolutely that deduction is company liability to be paid back to contractor.

 

 

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