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Level 1

How to record expenses paid by clients?

In our business we pay the fee to have our clients put in for a drawing.  Our clients then reimburse us the cost of the drawing.  We do not add any fees.  They send us checks or reimburse us through square etc...  I do not want to categorize this as income but how can I record the deposits and credit card charges as anything other than income and expenses?

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Level 15

How to record expenses paid by clients?

Drawing of what? Is that Art? A Raffle? Who sponsors this Drawing? Is that some sort of Lottery?

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Level 1

How to record expenses paid by clients?

My question is how do I record customer expenses that our company pays for and gets reimbursed for with zero financial gain. It doesn’t seem like it should be counted as income. 

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Level 1

How to record expenses paid by clients?

Basically I’m wondering how to record monies we front clients and then get reimbursed for without any gain. Doesn’t seem like it should be counted as income and be subject to taxes

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Level 15

How to record expenses paid by clients?

It is not unusual to have a misunderstanding that just because you didn't mark it up, makes it Not income. Think of this example: I sell you one $1 million robot. I spend $999,998 to build it, for labor and materials. This is Gross Expense and Gross Income. The Net or Difference is $2. I do not report only $2 on my tax form, and I would want a banker to see I had $1 million in Sales. Do not confuse Reportable taxable income (profit after deducting your costs) and Gross Income.

 

Now, a Law firm is an example of a business operation that often has to Advance Costs (as other current asset = lending), and these are not reported as their expense, because the settlement funds or the retainer funds used to cover these costs later is also not their income. Their Income is from their fees and services, not your filing costs, which they cover on your behalf. Another example: I helped convert a corrections facility to QB and nearly everything in the three files (two men's wings and one women's wing) is all Liability accounting. The pre-release residents have earnings from jobs, VA checks, etc, and the agency uses those funds to pay restitutions, counseling, training, meds, and even deposits for apartments and utilities, as well as the residents sign up to have the agency set aside "savings" so that when they are released, they have a small stash of funds to cope with the release.

 

But, if I buy a replacement router for you while trying to help you diagnose a computer system failure, and I don't mark that up, and I charge you my cost + my time, and if you are subject to sales taxes on material goods, then guess what? Not only is that router purchase my gross expense (as Cost of Goods Sold), the Sale to you is my Gross Income (net = $0, = no profit) and you are taxed on it. This is a typical business activity.

 

You should work with your own CPA, if you really think you never have expense or income. Most times, what you asked is your Business Operations as Gross Expense and Gross Income. Then you use Reporting to see Net.

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