Section 4: Payment and Entry Types

introduction and objectives this section elaborates on the different types of payments that are available in realdesk, and how each type is transformed into various accounting entries in qbo you will learn how realdesk and qbo handle received payments, intra brokerage transfers, and payments for excess funds, commissions, and withholdings additionally, you'll understand how to efficiently manage realtor expenses and reconcile undeposited funds learning objectives for this section understand how deposits and payments are recorded in qbo understand how liability, income, and expense accounts are debited and credited based on various transaction types discover how to manage realtor expenses via invoices, payments, and the role of the undeposited funds account received payments all received payments are created as journal entries ( dep or tlp ) in qbo payments received into trust or commission trust credit their respective liability account and are tax exempt payments received into the general account are treated as commission income gst / hst is collected intra brokerage transfers transferring money between a brokerage’s internal accounts is a two step process first, a transfer entry is created in qbo that accounts for the movement of cash between the receiving and originating accounts (debiting / crediting their respective balances) second, a txfr journal entry is created to account for transfers of liability / income in the case of a transfer from trust to commission trust, this entry debits trust liability and credits commission trust liability (both fully tax exempt) for a transfer from commission trust to trust (rare, but sometimes used when mistakes are made), this entry debits commission trust liability and credits trust liability (both fully tax exempt) for a transfer from trust to general (most common in scenarios where agents are paid from general), this entry debits trust liability (tax exempt) and credits commission income (gst / hst on sales) for a transfer from general to trust (rare, but sometimes used when mistakes are made), this entry debits commission income (gst / hst on sales) and credits trust liability (tax exempt) one exception to the above is the “payment to brokerage” that occurs when a deal has been fully paid out and the brokerage profit is transferred from a trust or commission trust account to general in this case, no journal entry is required as the trust liability has already been debited when the agent payouts were created for these types of transfers, only the actual transfer entry is required excess funds payments excess funds payments are created as bills and corresponding bill payments in qbo this is because there can be a time lag between when the payment is issued and when it clears the bank, particularly when paper cheques are used for excess payments sent from trust or commission trust, the bill debits their associated liability account (trust liability or commission trust liability), and credits accounts payable it is very rare for an excess payment to be sent from the general account, however in that circumstance, the bill debits commission income and credits accounts payable the bill payment debits accounts payable, and credits the bank account used for the payment external commission payments external commission payments include all outside referrals, as well as cases where your brokerage is responsible for paying the other brokerage’s commission (common in alberta and ontario, and usually involving the listing brokerage paying the buying brokerage) these payments are created as bills and corresponding bill payments in qbo external commission payments sent from trust or commission trust require an initial journal entry ( ci ) to debit the associated liability account (tax exempt), and credit commission income (gst/hst collected on sales) in the case of an external commission payment sent from the general account, the funds have already been categorized as commission income, therefore this journal entry is not required the bill then debits commission expense (cost of goods sold), and credits accounts payable (current liability) in this manner, commission income and commission expense offset each other, as do gst/hst collected and paid finally, the bill payment debits accounts payable, and credits the bank account used for the payment internal commission payments internal commission payments include all commission payments to your brokerage’s agents, including selling realtor and buying realtor, as well as referral deal payouts these payments are created as bills and corresponding bill payments in qbo internal commission payments sent from trust or commission trust require an initial journal entry ( ci ) to debit the associated liability account (tax exempt), and credit commission income (gst/hst collected on sales) in the case of an internal commission payment sent from the general account, the funds have already been categorized as commission income, therefore this journal entry is not required the first line of the bill then debits commission expense (cost of goods sold), and credits accounts payable (current liability) in this manner, income and expense offset each other, as do gst/hst collected and paid if deductions and/or expenses are being recovered from the realtor’s payment, additional lines of the bill are used for each of these for deductions, the income account selected for the deduction (e g deal fee income) is credited for expense recovery, the process is slightly different as an expense invoice has already been created in qbo (see below regarding expenses), and this invoice credits the income account selected for the expense (e g billable expense income) to avoid duplication, the line on the bill that pertains to the expense being recovered credits undeposited funds the expense invoice is simultaneously marked as paid finally, the bill payment debits accounts payable, and credits the bank account used for the payment withholding payments a withholding payment is similar to a deduction, except that the amount being deducted is payable to a third party instead of to the brokerage additionally, it is possible to withhold funds from several different deals, and then pay out the total amount withheld in one payment there are several cases where withholdings are used, including deferred gst payments to the agent (in this case, the “third party” is the agent), as well as garnishments and commission advance loans when funds are withheld as part of an internal commission payment, they are initially held as 3rd party withholding liability, and remain in the bank account from which the realtor was paid at a later date when the withholding is paid out, this payment is created as a bill and corresponding bill payment in qbo the bill debits 3rd party withholding liability, and credits accounts payable (current liability) the bill payment debits accounts payable, and credits the bank account used for the payment realtor expenses realdesk's expense manager and expense tracker allow brokerages to create agent expenses depending on the category, these can either represent reimbursement of expenses paid by the brokerage (e g real estate board dues, mls fees) or profit centres (desk fees, technology fees, accounting fees) in either case, though they are expenses for the agents, they represent income for the brokerage, and thus are linked to qbo income accounts tracking of receivables occurs in realdesk, and only paid expenses are sent to qbo for year end purposes, it is possible to generate an accounts receivable report in realdesk and create a journal entry in qbo to account for current a/r as soon as an expense is marked paid in realdesk, an invoice is created in qbo this invoice credits the income account associated with the expense (configured in realdesk's expense manager), and debits accounts receivable the invoice date is the date that the expense was incurred the accounting treatment of expenses recovered as part of a deal payout is discussed above in the internal commission payments section it is also possible to recover expenses outside of deal payouts, either manually (by going to the expense tracker and selecting “recover” next to individual expenses) or automatically (by configuring realdesk to periodically charge the agent’s credit card on file) for these types of recoveries, a linked payment transaction is created that pays off the linked invoice , credits accounts receivable, and debits undeposited funds undeposited funds is debited, rather than a specific bank account, to account for various manual expense recovery methods (e g paper cheques, or cash received from agents) additionally, credit card deposits typically arrive in batches as opposed to individual transactions accordingly, it is an important part of the general bank account monthly reconciliation to reconcile bank account deposits against undeposited funds in qbo you can do this by creating transfer entries from undeposited funds to general that match the amounts received this is explained in greater detail in the reconciliations section of this manual summary this section has provided a comprehensive guide to how various types of deposits and payments created within the realdesk platform are subsequently recorded in quickbooks online (qbo) by understanding how these entries are created, you can ensure accurate and efficient financial management for your brokerage leveraging these insights will help you maintain clear records, streamline your operations, and focus more on growing your business