Controlled tips are defined as tips that are payable to the employees on their next pay date, typically these are tips paid by credit cards. Recording these tips in General Ledger can be confusing for business owners since these funds are deposited into the company bank account but are owed to the employees. Since the funds do not belong to the restaurant, the deposit should be accounted for as a liability for the restaurant.
To properly account for credit card tips with your QuickBooks Online integration, please follow the steps below:
Step 1: Create a Tips Payable account in your QuickBooks Online Chart of Accounts. To create this account in QuickBooks Online, click "Accounting" on the left side menu and then click "New."
Step 2: Change the "Account Type" to Other Current Liabilities. Next, name the new account, we suggest naming the account Tips Payable. Then click "Save and Close."
Step 3: Inside of OnPay, navigate to the settings menu, then payroll integrations. Next, assign the account you created to the Controlled Tips Clearing Account.
Going forward your controlled tips will be recorded in your QuickBooks Online Chart of Accounts with each payroll. If you need to send a previously completed payroll to QuickBooks Online, please follow the directions found here.
Note: If your company does not break the credit card tips out from the income account when the monies come into your bank account, please leave the Controlled Tips Clearing Account blank inside of OnPay. The income account will be offset by a Controlled Tips wage expense item.