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Reimbursable Expenses vs Spending Allowance

Hello,

I'm using Q Home & Business subscription (Windows).

I set up a Cash account called "Reimbursable Expenses" where I "transfer" specific expenses incurred on my credit card and later invoice back to the client. (I label them with "E" and then apply them to an invoice).

Going forward, my client will be providing me with a monthly Allowance to cover vehicle and phone expenses. How and where would I enter the allowance expense of say $500? Would I just enter it on the invoice and categorize it as "Reimbursable Expense" so it goes to the reimbursement account?

If yes, then my reimbursement account would be negative $500 and I would presumably have to categorize actual expenses from my credit card account as Reimbursable until they match the allowance I received. However, if they are less than $500, the account wouldn't balance and I presume the allowance overage would be treated as income. Conversely, if my actual expenses are over $500, the expense overage would be treated as a loss (or I could expense the difference in next month's invoice). Also, once I receive payment, where and how would I apply the reimbursement portion?

Wondering if I'm on the right track or if there's a better way of handling it. Thanks for your help!

Comments

  • NotACPANotACPA SuperUser ✭✭✭✭✭
    The "Monthly Allowance" belongs in an "Accounts Payable" type account.  It's money that you owe.
    Periodically, you'll need to transfer funds from your AP account to that Reimbursable account to handle "repaying" yourself.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • G_D_KG_D_K Member ✭✭
    Thanks for your response @NotACPA. Not sure I understand when you say it's money that I owe. It's money that I receive that will help offset my business expenses. I tested putting it into an AP account through an invoice and it shows as a "REFND". How do I then transfer funds from AP to the Reimbursable account? Manually? through a payment? Either way, unless I'm missing something, once it's accounted for in the Reimbursable account, it's the same result as if I had put it there directly from the invoice (i.e. categorized as [Reimbursable Expenses] vs [AP - Business Bills]).

    All seems complicated and I'm tempted to simply treat the allowance as income and just have my expenses naturally offset my income for tax time, although I don't think that would be correct accounting. Thanks again for any feedback!
  • NotACPANotACPA SuperUser ✭✭✭✭✭
    When you receive the Allowance, it's money that you owe either back to the client OR to be used for client-related expenses. It's not a gift or additional income/salary.
    SO, you deposit the allowance into your checking account and use "Accounts Payable" as the transfer account.
    THEN, when actually have a client expense, and say charge it on a credit card, use "Accounts Payable", again, as the transfer account.
    It's not apparent to me why this would need to go thru an Invoice.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • G_D_KG_D_K Member ✭✭
    Got it. So my AP would have a negative balance (equal to the original allowance received) that would progressively increase towards zero as I transfer the business related credit card expenses there.

    So in essence, this works in the same way as my original "Reimbursable Expenses" Cash Acct (i.e. transfers from credit card being positive, and then offset by the transfer from the checking acct which show up as negative).

    One thing that's confusing me is that in both cases, if my expenses are less than my reimbursement (or allowance), the net result is a lower ending balance even though I received more than I spent. I would assume that if I received more than I spent, the difference would be treated as income (a positive number) that I'd eventually get taxed on. (Btw, my client wouldn't be expecting me to pay it back as it's a pre-negotiated amount).

    The reason it's going through an invoice, is because my client needs a monthly invoice from me for my consulting fees plus the allowance. Thanks again for your input on this.
  • NotACPANotACPA SuperUser ✭✭✭✭✭
    Wouldn't that extra money just roll over to the next month?  Or for some future month when you DO have higher expenses?
    You should also ask the client how they intend to report this money a year from now, for your next tax reporting.
    I'll have to think about the Invoicing issue.  Even though I use H&B, it's been years since I retired ... so I don't have any current clients/invoices.
    Q user since DOS version 5
    Now running Quicken Windows Subscription,  Home & Business
    Retired "Certified Information Systems Auditor" & Bank Audit VP
  • G_D_KG_D_K Member ✭✭
    Yes, assuming my expenses would vary monthly (i.e. lump sum car insurance), I would just reconcile at the end of the year, and potentially end up ahead.

    I think the client would be reporting it as a business expense related to phone and automobile. That said, because I'm incorporated I believe any funds given to me will be offset by any expenses I incur - and for the client, I believe any outflows are their business expense since they're technically not paying me income.
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