Glad to have you back here in the Community, @wsenti0.

I've got some clarifications to share regarding your account concern for the vacation time entered in QuickBooks Desktop.

Yes, your assumption is correct. The balance will show as negative since the vacation time was used already. To show the correct figures, you may enter a journal entry for the used time in the accurate liability account.

On the other hand, to automate the actual earning of vacation in the same liability account, you'll need to edit the vacation payroll item. This way, you can select the correct liability account to be used. Doing this will connect the liability account used in the Chart of Accounts, and have the actual vacation time liability show up on the balance sheet.

To do that: 

1. Click on List at the top menu bar.
2. Hit on Payroll Item Lists.
3. Double click the vacation item name.
4. Press on Next.
5. From the Expense Account section, choose the correct liability account to be used. 
6. Tick on Finish.

Here are some resources that you can visit about changing liability account associated with a payroll item and managing payroll liabilities in QuickBooks Desktop for reference:

• Payroll Liability and/or Balance Sheet Report shows incorrect amounts for payroll liabilities
• Change an expense or liability account associated with a payroll item

If there's anything else that I can assist you with, let me know. I'll make sure you're all set. Stay safe!