Section 5: Deal Walkthrough

In this section, we will explore the Send/Receive Payments page in RealDesk and its integration with QuickBooks Online (QBO) via a comprehensive walkthrough of a sample deal. You will see how deposits, excess funds payments, commission payments, and intra-brokerage transfers, are recorded in QBO. The walkthrough also demonstrates how the deal fully balances once completed, and provides tips on how to ensure that this is the case.

Learning Objectives for this section:

Let’s look at a sample deal in RealDesk, and the associated accounting entries in QBO. This brokerage uses Trust, Commission Trust, and General accounts. The conveyancing flows are based on British Columbia practice, in which excess funds are paid to the lawyer, and in which the buying brokerage receives its commission from the lawyer if not holding a deposit. In other provinces, RealDesk automatically adapts its payment flows, as well as its QBO integration, to the applicable standard practices.



This is a buying deal, in which our brokerage was holding a $50,000 deposit. This is created in QBO as a Dep journal entry, which debits the Trust bank account, and credits Trust Liability:



RealDesk calculates that we only require a total of $14,175 ($13,500 gross commission + GST) to pay our commission, including the referral. Accordingly, it generates an excess funds payment of $35,825 to the buying lawyer. This is created in QBO in two parts: first, as a Bill (representing the creation of the cheque), debiting Trust Liability and crediting Accounts Payable: 



The associated Bill Payment (representing the payment of the cheque) debits Accounts Payable and credits the Trust bank account:



When the agent entered the commissions for this deal into the commission calculator, he included a 10% ($1,350 + GST) referral payment to an agent at another brokerage, Sutton 1st West. This requires a few different entries in QBO. First, we create a CI journal entry that debits Trust Liability and credits Commission Income. Note that since Commission Income is considered to be Sales, the appropriate tax code (GST / 5% in BC) is applied to the credit side of this journal entry:



Next, the payment itself is created as a Bill, debiting Commission Expense (cost of goods sold) and crediting Accounts Payable. Note that Commission Expense is also tax-eligible, therefore the GST collected from our previous CI entry is offset by the GST paid out here:



Finally, the associated Bill Payment debits Accounts Payable and credits the Trust bank account:



Having made all the required payments from the Trust account, we’re ready to transfer the balance of $12,757.50 to Commission Trust. This requires two entries to be created in QBO.

First, a Transfer entry accounts for the movement of cash from the Trust bank account to the Commission Trust bank account:



Second, a TXFR journal entry debits Trust Liability and credits Commission Trust Liability:



At the conclusion of this step, we should now see in QBO that our Trust bank account balance, as well as our Trust Liability balance, is down to zero where this deal is concerned. A key element of maintaining clean books is ensuring that Trust and Trust Liability always balance each other; if these balances get out of sync, this is a sign to investigate further.

The commission payment to our agent is the most complex part of our deal accounting, because of the brokerage’s ability to offset a commission payment with deductions and expenses. We’ll break down each aspect of this process to explain how all of these transactions and entries fit together.

The first order of business is to ensure that, since we’ll soon be disbursing our $12,757.50 balance from the Commission Trust account, that we also clear off our Commission Trust Liability. To do this, we create a CI journal entry that debits Commission Trust Liability and credits Commission Income. Note that since Commission Income is considered to be Sales, the appropriate tax code (GST / 5% in BC) is applied to the credit side of this journal entry:



For the actual realtor payment, let’s first look at how it was created and calculated in RealDesk:



We know that the agent’s gross commission is $13,500, but we already paid out 10% of this as a referral in a previous step. This leaves a balance of $12,150 + GST for a total of $12,757.50, which matches our current Commission Trust balance.

This amount is offset by two additional transactions:

These two transactions total to $1,265 + $63.25 GST ($1,328.25), which will be our brokerage payment in the final step. 

This leaves a net payment of $10,885 + $544.25 GST ($11,429.25) to the agent. This payment is created as a Bill. The Bill’s first line debits Commission Expense (cost of goods sold). Note that Commission Expense is tax-eligible, therefore the GST collected from our previous CI entry is offset by the GST paid out here.

The second line of the Bill pertains to the 10% deal fee deduction and credits (or rather, creates a negative debit to) Deal Fee Income, which was the QBO income account to which this deduction was mapped when it was created in RealDesk’s Deduction Manager.

The third and last line of the Bill pertains to the $50 expense. This line credits (negative debits) Undeposited Funds, which would initially seem inconsistent as the QBO income account matching this expense is Billable Expense Income. Why would this line not credit Billable Expense Income? It’s because a QBO Invoice has already been created for this expense; this occurs as soon as the expense is created and becomes active (outstanding) in RealDesk: 



That Invoice has already credited Billable Expense Income; therefore doing so again in the Bill would over-report our income. Crediting Undeposited Funds allows us to pay off the associated Invoice without any income duplication.

As with all other Bills, Accounts Payable represents the credit side:



For internal commission payments, a CO journal entry is used to pay off the Bill, that debits Accounts Payable and credits the Commission Trust bank account:



Our final step is quite simple as we’ve already dealt with our liability, income and expense balances. We simply need to reflect the transfer of the cash for the brokerage payment from Commission Trust to General, with a Transfer entry in QBO:



Now that we’ve seen all the individual entries, let’s make sure that everything balances out the way it should. First, we can check our Trial Balance in QBO:



Key elements to validate here include:

We can also click on each of these individual accounts to see how we got to our final result. For example, we can see that Trust Liability was increased by $50,000 when we received the initial deposit and was subsequently debited by $35,825 from the excess funds payment, a further $1,417.50 from the referral, and the remaining $12,757.50 with the transfer to Commission Trust:



We close our deal with a Trust Liability balance of zero, which both makes intuitive sense, and matches our Trust Bank account balance from the Trial Balance above.

By thoroughly understanding the Send/Receive Payments page in RealDesk and its integration with QuickBooks Online (QBO), you can ensure precise and efficient financial management for your brokerage. This walkthrough of a sample deal highlights how deposits, payments, and transfers are accurately recorded and balanced in QBO. Understanding and applying these principles will help you maintain clean and balanced accounts, streamline your financial processes, and support the smooth operation of your brokerage.