u/egcameronisavirgo

Here are the facts:

• LLC partnership (service revenue)
• One of the partners has their own merchant account set up through the POS
• All revenue and tips collected by this partner are paid out through their separate merchant account, but all revenue and tips show up as revenue for the business
• When recording the monthly sales JE, I code their merchant payout as a guaranteed payment
• Fast forward to year-end close and tax prep: tips payable is overstated by the amount of tips collected by this partner because when I recorded their monthly merchant payout, tips payable wasn't reduced by the amount of tips paid out
• Cool. No problem. I'll do an adjusting entry
• I go to make the adjusting entry, and I have no idea what account to offset the decrease in tips payable, because the correct amount of payouts has already been recorded as a guaranteed payment, confirmed by their 1099K. Simply debiting tips payable and crediting guaranteed payments will understate GP.

Here's my JE:

Tips Payable DR 1000 (to reduce tips payable)

Guaranteed Payment DR 1000 (to record tips being paid)

Guaranteed Payment CR 1000(to reduce GP since the payouts were already recorded in the monthly JE)

????? CR 1000 (what account do I credit to balance the JE)

What am I missing? I feel so incredibly dumb for not being able to figure this out.

My people, please help so I can stop obsessing over this and move on with my life.