How does a restaurant account for tips? Debit cash and credit a tip liability account. When you pay the servers the tip $, you debit the Liability and credit the cash.? You can account for tips by setting up a separate revenue account. You can use Revenue - Tips account recorded in your income statement under other income separate from your regular revenue. With this, you can distinguish how much is your tips from other revenue you have. If you do the revenue method? How do you account for the cash when the tip is paid to the server?