Quickbooks does allow this but ONLY with expense accounts, not COGS.

(preferences, time and expenses, company tab, click the box that says track reimburseable items as income.  But then you also need to go into each applicable expense account  (lists, chart of accounts, right click on account, edit - and there will now be a box to check for Track reimbursed expenses in income account and a spot to pick your income account.

The only work around I can find is to charge everything to an expense account and annually - journal entry it back to a cost of goods sold account.       However, mileage is an expense.   Cost of goods sold would be materials used in the production of your income - such as purchasing lumber to to build a shelf to be sold.

Quickbooks does allow this but ONLY with expense accounts, not COGS.

(preferences, time and expenses, company tab, click the box that says track reimburseable items as income.  But then you also need to go into each applicable expense account  (lists, chart of accounts, right click on account, edit - and there will now be a box to check for Track reimbursed expenses in income account and a spot to pick your income account.

The only work around I can find is to charge everything to an expense account and annually - journal entry it back to a cost of goods sold account.       However, mileage and meals reimbursement are an expense.   Cost of goods sold would be materials used in the production of your income - such as purchasing lumber to to build a shelf to be sold.

@rkram0601 I knew I was right on this!, I have the same situation; I provide services and pay bills/make purchases for clients to be reimbursed in my future monthly invoice with my hours worked.  I categorize the expenses just like you,  "Client Bills/purchases" type "Other Current Assets" Detail Type "Loans to Others." and I get the same error message when trying to categorize.  It's been 3 years since you posted this, did you find a solution? if so, can you share?...  I don't understand why QB has videos for everything EXCEPT for what to do when we encounter errors such as these, and the  "you need to consult a CPA or Accountant" response from QB is getting really old :(.  This is why we have QB and not an accountant/CPA, so we can do things ourselves and avoid higher costs on bookkeeping.   

Reimbursable expenses are tracked on a spreadsheet.  They are added up and put as a seperate line item on the client invoice.  The client sends a reimbursement check.  Then the credit card statement arrives.  How do I go about recording/categorizing the reimbursable expenses when I reconcile the credit card stmt?  

Second question, if i start tracking expenses (billable to the client), how will this affect creation of the invoice?

Welcome to the Community, @8K.

I understand the importance of recording your reimbursable expenses in QuickBooks Online (QBO) for you to be able to reconcile your credit card statement. 

To answer your question regarding what will happen to your invoices when you start tracking your billable expenses. A billable expense is an expense incurred on your customer’s behalf when you perform work for them. You can easily record and track billable expenses so your customer can reimburse them when they receive their invoice. 

In creating a record of a bill to a customer as an expense, follow the steps below:

1. On the left panel, tap + New.
2. Choose the transaction you want to create.
3. Pick which payee. 
4. Select an expense account for a transaction from the Category Column.
5. Enter the description and amount of your expense, then click Billable.
6. In the Customer column, choose the customer you want to bill for this expense. 
7. Select Save and Close. 

Once done, we can create an invoice with your billable expense. You can go to your Invoices and select the customer you have made a billable expense in the Customer ▼ dropdown tab. A panel window at the right corner of the screen will pop up that suggests different transactions. Then, Add the billable expense you want to charge your customer and click Save. 

I am adding this article for you to refer to for complete guidelines on entering a billable expense: Enter billable expenses in QuickBooks Online.

Moreover, if you want to know how to reconcile your transactions in QBO, you can refer to this article: Reconcile an account in QuickBooks Online.

If you have further inquiries about expenses in QBO, feel free to comment below. I’ll be happy to assist you. Have a great day!

This does not seem to apply to expenses already invoiced and paid by customer. Is there a way to get the income to show for previous transactions?

Hello nar883, I know you helped out on this issue back in 2020. I have to get reimbursement for PG&E from tenants and want to set this up correctly in Quickbooks desktop. Hoping you're still on here.

When I click on the chart of accounts to choose what account to have the reimbursement go into, should this account be considered Income? Meaning, when I add new account named "PG&E Reimbursement" to choose, this would be the income account, right??

Hello there, @SRE2004.

While we await nar883's response, I'm here to share details on setting up the reimbursement from your tenant.

Yes, you will want to create an income account for the PG&E reimbursements. More specifically, it's advisable to categorize this as Other Income instead of regular income. This distinction is important because the reimbursements represent a recovery of expenses rather than income generated from your primary business operations.

Moreover, ensure to tick the Track reimbursed expenses as income in the preferences:

1. Go to Edit and select Preferences.
2. Scroll down to Time & Expenses and choose the Company Preferences tab.
3. In the INVOICING OPTIONS, tick Track reimbursed expenses as income.
4. Once done, click OK.

Once you’ve set up the account, you can create a bank deposit to record the reimbursement you'll receive.

Additionally, please reconcile your accounts regularly to keep them accurate and up-to-date.

Let us know if you have other concerns with your reimbursement in QBDT. We're here to help you in any way we can.

Since you can't get rid of COGS in QB even if not needed, most people I have worked with use it as "COS" (Cost of Sales). What we normally call Direct Cost vs. Indirect Cost. COGS is really only used if sell products and keep inventory. I'm a services business so COGS is NA for me. However, you must use COGS in QB if you want to see Gross Margin separate from Net Income.