Discussion:Restaurant Tips
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Discussion Forum Index --> Accounting Questions --> Restaurant Tips
9 December 2008 | |
| I'm working with my first restaurant and I have a few questions regarding employee tips. Most of the restaurant's deposits are made up of credit card sales that include the tips. The owner pays the employees semimonthly and includes a set amount for tips. I am using Quickbooks, and have created a tips in/tips out so that they are taxed as wages. By doing this, the tips are not being deducted on the P&L.
Because we are showing 100% of the deposits as income, is it normal to then make an adjustment at the end of the month, such as debiting income and crediting something like 'employee tips' to take this deduction? Or is there a better way of doing this? Thanks for your help! Sally | |
| 11 December 2008 | |
| Just curious - any reason why you don't let them take their tips in cash at the end of each shift?
Since not ALL of deposits reflect income, for example, some money deposited may reflect refunds for expenses, I would recommend breaking out the different types of income when posting the cash into the bank acct. Either way, DR the income acct, and CR a liability account for "Payable - Employee Tips". When you pay the employee, you will DR the same "Payable - Employee Tips" acct, and CR the cash in your bank account (to show it as paid). At time of original deposit:
To record the liability(each time you record the deposit):
To record the CC Tip reimbursement to the employee:
Hope that helps | |
| 14 December 2008 | |
| Why debit income at all. Debit cash credit payable then reverse when you pay them the tips. | |
| 14 December 2008 | |
| Actually a debit to income wouldn't work at all since revenues have a credit balance. If you did it the way Mich said you would end up understating your income. | |
Outwesttax (talk|edits) said: | 15 December 2008 |
| I'm assuming you are saying the employer pays the credit card tips the employee accumulates from credit cards to pay out on the paycheck. If so, all you need to do is eliminate the "tips out" half of the paycheck to fix this.
If, on the other hand, the credit card tips are paid at the end of a shift, then you would credit "tips payable" (other current liability) for the tips portion of the deposit. When you pay the waitstaff, debt tips payable and credit cash. Leave the tip in/out on the paycheck to handle the tax withholdings. | |
| 15 December 2008 | |
| If your client has limited bookkeeping skills, here is a fast and dirty way to do it:
1. Deposit all the restaurant gross receipts, including tips and meals tax, and credit the income account. 2. When you pay out the tips to the employees, or when you remit the meals tax, debit the income account. The audit trail suffers somewhat when you use this method, but it is simple for novices to handle. At the end of the accounting period you will need to make adjusting entries for any undisbursed tips and the amount due for meals tax. | |
Roaringcpa (talk|edits) said: | 19 February 2010 |
Can someone PLEASE confirm for me that for a restaurant that collects and distributes tips to its servers (and withholds the appropriate payroll taxes):
total wages expense will NOT equal the total wages on their W-2's | |
| 19 February 2010 | |
| unless they have a 'tips in' income category accounting for the customer's tips | |
Roaringcpa (talk|edits) said: | 19 February 2010 |
| right on...thanks Kevin | |
