Payroll Tips

brenbren Member Posts: 1

Our POS accounts for tips, we put them into the bank, then they are payed out by payroll. What is the best practice for accountingfor tips? I split the transaction for the deposit into POS sales and added a liability account, but it is still asking for a Expense Category. Thanks in advance for help on this issue.

Comments

  • Michelle_AMichelle_A Administrator Posts: 45 admin

    Hey there! Our Payroll service is not necessarily optimized for tips. For example, adding them as a bonus pay would not yield the correct tax deductions.

    With regards to accountingthe tips themselves, we have found some users avail of the following workaround:

    1. Create a Liability Account called Tips
    2. When a Transaction is recorded in Wave, you can split the tips from the transaction (you can read about splitting transactions here: https://support.waveapps.com/hc/en-us/articles/208621536-How-to-split-a-transaction)
    3. Once the Transaction is split, you can he delete the split portion of the Transaction which was tips, and create a journal transaction which credits the Tips account for the amount of those tips, and debits the Payment (i.e. bank account) into which those funds were deposited
    4. When you pay those tips out to yourself or your employees, you'll create a journal transaction which does the opposite: Debits the Tips Liability account and credits the Payment account from which those tips are paid-out
Sign In or Register to comment.