Hi and thank you for taking the time to read my question.
I have an employee that recently used his personal credit card to purchase inventory. Would this be an expense or still COGS? Ideally I would like to reimburse the employee (through QB Payroll) and then just pay the bill with the corporate card so that the inventory is reflected under COGS. However, obviously if I do this it will record the transaction twice. Once for the reimbursement and once for the supplier bill payment. If I just utilize the payroll reimbursement function it does not reflect in my COGS and instead gets treated as an expense. It also does not allow me to track the purchased inventory.
2 things that I thought of:
1) reimburse the employee through payroll and then reduce the company supplier bill to zero (as the cost was already taken on through the reimbursement), "paying" it so that my inventory is updated. Of course in this case I would be opting to just take this on as an expense as it would not be recorded under COGS when the inventory is sold.
2) Create the employee as a supplier and then issue myself a "bill" from the employee. The issue with this is that then the employee would have to invoice me (for reporting purposes) which obviously he does not have his own company and therefore does not have a GST # or accounting software.
I'm not sure if either option is even proper. So, if anyone could please walk me through the best and correct way to do this it would be much appreciated.
I commend you for doing your research to find the most accurate way to track your expenses and employee reimbursements, especially when it comes to inventory items. I know how important this process is and I want to point you in the right direction for how this works in QuickBooks Online.
When you use the Reimbursement pay type in QuickBooks Online Payroll, the amount comes from the bank account that you use to pay your employees, and is tracked to a separate Reimbursement account in the Chart of Accounts, as it's not a regular payroll expense. Choosing to record the expense by adding it to your employee's paycheque, as you mentioned, means that you'll still need to find a way to track the inventory items and the expense to COGS. You can Adjust inventory quantity on hand without recording a purchase or sale to reflect the items purchased by your employee, but it's important to note that QuickBooks will automatically record adjustments to your Asset and COGS accounts.
In this instance you may need to create a journal entry to move the money from the Reimbursement account to the appropriate expense account, but what it comes down to is consulting with your accountant. An accountant will be able to advise you of the best method for recording this type of transaction for your business. If you're already working with one, you can invite them to QuickBooks by navigating to the My Accountant tab, or use the Find a pro to help button to find a QuickBooks-certified accountant in your area.
I want to share another article that I think might help you out with this:
Thank you for your help. It seems the best course of action would be to reimburse my employee then move money from the reimbursement account to my COGS account and then manually adjust the inventory level. This would mean that my COGS would be recognized immediately versus when the items sell as it usually occurs (as there is no way to allocate money to a specific product in a journal entry for COGS that I am aware of). Would this be proper and am I understanding correctly?
Based on the information that my colleague shared earlier, it sounds to me like what you have stated is correct. To be completely certain, I recommend reaching out to an accountant as they're the experts when it comes to how accounts are affected by different transactions. The instructions in my colleague's post will allow you to invite your accountant to view your books or find a Pro Advisor who can advise you.