I am in the same boat! I cannot believe QBO cannot solve this issue! There are many businesses that have tips! I just spent 3hrs on the phone with someone God knows where who couldn't understand my problem because they do not understand accounting.
Client is a hairdresser and records tip income as part of the total deposit with the sales.
Cash DR100
Revenue CR 75
Tip Liability CR25 (This is being created automatically I guess thru Square which is fine since tips are a liability until actually paid out and delivered to the employee.
NOW! I want to clear out the liability account when QB payroll does the payroll check. Otherwise this accumulates the whole year and just left.
Tip Liability DR 25
Cash CR 25
The problem is when QB suggest to do a payroll check and use paycheck tips to fill in the amount of tips, then it just overstates my wages! If I use the example above, and say $200 for wages + $25 tip, it shows $225 as wages on my PnL which is OBVIOUSLY (QBO!) overstated! The client does not get a deduction for tips that they do not even pay, their customer pays their employee the tip! They are just holding the tips when received in a liability holding account waiting to be paid out in a paycheck. Then what am I supposed to do? At the end of the month etc. come in and do a journal entry to CR wages $25 and DR the tip liability for $25? How stupid is that? Can't their payroll system allow for the mapping of a liability to tips paid out? So frustrated!! PLEASE let me know if you have solved this!
