Discussion:Tip income
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Discussion Forum Index --> Accounting Questions --> Tip income
| 20 August 2007 | |
| How would a salon owner book tip income? It is income to the employee and not the salon, right?
I realize the salon owner needs to pay FICA on the tip income, but what would the entry be? Is there somekind of retained tip account? Thanks, | |
Actionbsns (talk|edits) said: | 20 August 2007 |
| Seems that it would run through payroll just like with a restaurant. You have to book tips paid in, and tips paid out, so that you get the FICA/MC calculation and you get it on the W-2, but it's not an income or expense item to the salon, only to the employee. | |
TheTinCook (talk|edits) said: | 20 August 2007 |
| There are two ways to do tips 1) where the employee keeps the tip and 2)Where the employee doesn't cash out their tips. (Usually from credit card tips, tip pools, employee had to leave before customer cashed out)
The exact mechanics of it depends on the accounting system you are using. You should have a report of cash tips and cc tips cashed out from each employee. In QuickBooks I make a payroll addition item called Tips (you can do one for reported cash tips and one for tips paid out by paycheck), and an after tax payroll deduction item called Retained Tips. If I had to use a manual accounting system I would do something like... dr cash dr retained tips . cr sales . cr tips/P Recorded summary of daily sales and tips retained by employees.
dr tips/p . cr wages/P . cr payroll tax/P . cr retained tips Recored payroll.
. cr cash Paid employees. I wonder what kind of account retained tips would be. | |
| 20 August 2007 | |
| Great! That's just what I was looking for. I would think retained tips would be a payable account??? current liability.
Thanks for your help! | |
Actionbsns (talk|edits) said: | 20 August 2007 |
| TinCook - in Hawaii, if you booked tips to sales as you do in your first step, the restaurant owner would be required to pay GE Tax on that "income". How would you avoid that? | |
TheTinCook (talk|edits) said: | 20 August 2007 |
| I didn't book tips as sales and I don't need to avoid GE tax. I made a compound entry. I could've made seperate entries.
Say I had 1000 in food and beverage sales and the customers left a 100 in cash tips which the employees kept and 100 in credit card tips. At the EOD I would make the following entry
dr retained tips 100 ........cr sales 1000 ........cr tips payable 200 OR dr cash 1000 ........cr sales 1000
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Actionbsns (talk|edits) said: | 20 August 2007 |
| I see what you are doing now, I originally thought you were just booking the tips only, but you're doing the entire sales for the day. GE Tax is definitely weird - especially for people who come from California, but it's not that weird. Your JE would not generae GE taxes on the tips. All is right with the tip world. | |
