When an operator sells scrap pipe from a well, the proceeds don't belong entirely to the operator. Every working interest owner has a proportional claim to that revenue. Getting the accounting right means the money needs to flow through the books correctly — recorded as a deposit, offset through a contra account, and then distributed by ownership percentage back to Lease Operating Expense (LOE).
This is where DMIE (Pivoten's distribution software) and QuickBooks work together. The operator records the sale and deposit in QuickBooks, enters the credit in DMIE, and DMIE handles the offset and ownership allocation automatically — as long as the expense code is configured correctly.
The critical concept to understand: the operator is not earning income when scrap pipe is sold. The operator is merely a pass-through — collecting the proceeds on behalf of the well and returning the value to each working interest owner. If the sale is booked as operator income instead of flowing through a contra account, the operator's financials will be overstated and the joint interest owners will never see their share.
Below, we walk through each step of this workflow with a $10,000 example so you can see exactly how the journal entries, DMIE configuration, and final GL balances should look.
Before we get into the step-by-step, it's worth pausing on the single most important point in this entire workflow: the scrap pipe proceeds must be deposited into a contra account — not an income account.
When the operator invoices a buyer for scrap pipe in QuickBooks, the natural instinct might be to credit a revenue or income account. But that would be wrong. The operator does not own 100% of that pipe. The operator is acting as a custodian — selling the asset on behalf of all working interest owners and passing the money back to the well.
By crediting a contra account (such as 6090 – Salvage Recovery / Scrap Pipe), the deposit is held in a temporary holding account. It sits there until DMIE processes the distribution, at which point the contra account is zeroed out and each owner's share is reclassified to LOE. If you skip the contra account, the full $10,000 shows up as operator income — and that's a misstatement that will ripple through your financials, your JIB statements, and your tax reporting.
We'll use the following example throughout this guide:
| Scrap Pipe Sale: $10,000 | |
| Operator | 40% — $4,000 |
| Owner B | 35% — $3,500 |
| Owner C | 25% — $2,500 |
The workflow begins when the operator creates an invoice in QuickBooks to the scrap buyer. Once the buyer pays and the operator deposits the check, QuickBooks records the following journal entry:
| Account | Debit | Credit |
|---|---|---|
| 1000 – Operating Bank | $10,000 | |
| 6090 – Salvage Recovery / Scrap Pipe | $10,000 |
Notice what happened here: the credit side of this entry goes to 6090 – Salvage Recovery, not to an operator revenue account. This is the contra account. It acknowledges that money came in, but it does not classify it as the operator's income. The cash is in the bank, and the salvage account carries a credit balance — waiting for DMIE to come along and distribute it properly.
This is where most mistakes are made, and it's the step that determines whether everything downstream is correct or wrong.
Every expense code in DMIE has two QuickBooks account mappings, and both must be set properly:
This field controls where the operator's working interest share of the expense posts in QuickBooks. For scrap pipe, this should point to:
→ 6000 – Lease Operating Expense (LOE)
This is the expense account. When DMIE distributes costs by ownership, the operator's 40% share will land here.
This is the field that makes the entire workflow function. It controls what happens when the operator enters a credit expense under this code — essentially telling DMIE: "when the operator posts a credit using this expense code, send the full value to this account as income."
→ 6090 – Salvage Recovery / Scrap Pipe
This is the "glue" between DMIE and QuickBooks. When the operator enters the $10,000 scrap credit in DMIE, the software sees the income account mapping and automatically posts the full amount as a debit to 6090 — which offsets the original credit from the QuickBooks deposit. This eliminates the need to create a separate invoice in DMIE for the salvage revenue. The expense code's income mapping short-circuits that process entirely.
When the operator enters the credit expense in DMIE (on the well, with the operator listed as vendor), and the distribution is processed, DMIE posts the following to QuickBooks:
| Account | Debit | Credit |
|---|---|---|
| 6090 – Salvage Recovery / Scrap Pipe | $10,000 |
This debit perfectly offsets the original credit from Step 1. The net balance of the salvage recovery account is now zero — exactly where it should be. The proceeds have been acknowledged and are now ready to be reclassified by ownership through the distribution.
With the contra account zeroed out, DMIE allocates the expense across all working interest owners. Each owner's proportional share is posted to Lease Operating Expense:
| Owner | WI% | Amount to LOE |
|---|---|---|
| Operator | 40% | $4,000 |
| Owner B | 35% | $3,500 |
| Owner C | 25% | $2,500 |
| Total | 100% | $10,000 |
The operator's 40% share ($4,000) is posted to the LOE account configured on the expense screen. The remaining $6,000 belonging to Owner B and Owner C is credited through the distribution — they'll see these amounts on their joint interest billing (JIB) statements.
After the full workflow completes, here is what QuickBooks shows:
| Operating Bank (1000) | +$10,000 | Cash received from sale |
| Salvage Recovery (6090) | $0 | Fully offset — clean |
| Operator LOE (6000) | $4,000 | Operator's 40% WI share |
| Non-Op Distribution | $6,000 | Credited to Owner B and Owner C via JIB |
Everything balances. Cash reflects the actual sale proceeds. The salvage contra account is clean. Each owner bears only their proportional share. And critically, the operator's income is not overstated — because the sale was never treated as operator income in the first place.
If the DMIE expense code is not configured with both account mappings, the workflow breaks down:
When the expense code is configured correctly — with LOE on the expense side and Salvage Recovery on the income side — all of these problems disappear. Cash is accurate. The contra account nets to zero. LOE reflects true ownership. And the operator retains only what they're entitled to.