Why do the customer are wanting to list reimbursable items as Income?

Hello Maligna3,

Expenses are items or services you paid for are categorized to the expense accounts. However, these expense are categorized to an income account if they are billable to your customers. Thus, they are also called as reimbursable expenses which can be considered as your income.

You might want to read this thread to know more about it: https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/when-i-bill-my-clients-i-re....

Aside from that, your accountant can also explain these details.

Feel free to get back to us so we can help you set up the details within QuickBooks. Have a great day!

The proper account method for reimbursed expenses is to count them as income on your profit and loss statement.  The original expense will deduct from that income giving you a net profit of zero, as you would expect.

The only method I've found for reimbursing cost of good sold - is to post it to a materials  expense account, and then monthly/annually move the entire balance to cost of goods from the expense account by journal entry    (NOTE QUICKBOOKS ADVISOR - please suggest a fix for this!).    You may have to do from a profit and loss by job and make an entry for each customer to keep your job costing correct.

Cost you pay to anyone is expense (or COGS).  When billed to customer becomes revenue (income).

 $100 Revenue

-$100 Expense

$   0    Profit/Loss

Hello, I am with Brownies on this one. 

My employees travel to client locations to preform work. Those travel expenses are a cost of goods sold AND reimbursable, therefore income. 

I post my credit card bills to COGS and then invoice the client with the reimbursable expense group. Quickbooks does not give me the option to select which income account to post the expenses on the client invoice. I have to manually keep track and manually create a journal entry, which is not something that should have to be done. 

Please review this and fix so that all of us can account for things properly without the manual entry and room for error. 

I'm using QBO and I changed my settings to track billable expenses as income. I am an injury attorney and advance expenses to litigate on behalf of the client but receive them all back upon successful case resolution. It's not income, it's treated as an interest free loan by the IRS. It's technically an asset. Anyway, after changing the settings, I set up an account called "Client Costs Advances" type "Other Current Assets" Detail Type "Loans to Others." The sub accounts are things like court filing fees, postage, expert witness fees, etc. Each of the sub accounts are Type "Other Current Assets" and Detail Type  "Other Current Assets." I set up each client/customer in my sales account, then when categorizing expenses I tag each expense under its appropriate sub account and select the correct customer/project (My client). I click "billable" when this is done and as I go to add the expense, I get the message in the attached image. How do I fix this?

Thanks for sharing a screenshot of the error, rkram0601.

As the description suggests, you are getting this error because the expense account you've selected doesn't have an Income account associated with it. You've also mentioned that the billable expense you're tracking will not be counted as an income. 

You can follow these steps for QBO to not include the billable expense as income: 

1. Go to the Gear icon and select Account and Settings.
2. Proceed to the Expenses tab, then click Bills and expenses.
3. Uncheck the box for Track billable expenses and items as income.
4. Click Save. 

Then, proceed to these steps to resolve the error:

1. Go back to the Gear icon and select Chart of Accounts.
2. Look for the expense account, then click the drop-down list beside Run report and select Edit.
3. Check the box for Use for billable expenses checkbox.
4. Select the account you want to link in the drop-down list for Income Account.
5. Click Save and Close.

Let me share some of our guide articles related to tracking billable expense in case you might need them in your future tasks: 

• How To Remove A Billable Expense Charge
• Delete Customer With Unbilled Charges

The Community is always here if you need anything else. 

@rkram0601

IRS does not give loans and surely would never do interest-free! I am assume you were joking, lol.

Sounds like what you have is an asset called Prepaid expenses since you are wanting to wait to expense the COS until you record income from client.  If you were doing accrual-basis accounting, would record income as earned along with associated expense.

I suggest DO NOT use option to record billable COS as income since then it just disappears and you can no longer see the income or COS on your books.

Hello- is there any way to have multiple expenses go to the same reimbursable income account? For example, I break travel into flights, meals, etc. but would like all reimbursement income to go to a category called "reimbursed travel expenses"

Hello, these instructions are great. Is there a way to have multiple expenses go to one income category when reimbursed? For example I have sub accounts under travel for flight, hotel, lodging, etc. that when reimbursed I would like to go to "reimbursed travel". When I go to do that I get a message saying "this income account is already being used by a reimbursable income account. It can only be used by one expense account. Please choose another income account."

Hello JMWC!

I also like the instructions given in the previous replies. Your goal is kinda different though, but I'm happy to share the steps to achieve it.

When you make an expense transaction billable to a customer, a billable expense charge is also created in the background. That charge will post to the Billable Expense Income account by default, but you can replace the account with your Reimbursed Travel account before invoicing your customer. You'll want to do this to every billable expense charge transaction because there isn't a setting that lets you assign that income account for the future billable charges.

Please don't hesitate to go back to this thread if you have more questions about changing the income account. Have a good day!

@brownies1476 

Must disagree. Have worked on many accounting systems and only seen this done on QB but do not use.

I need to see the cost/expense as a cost/expense on P&L and need to see the revenue/income separately.

True if you charge no mark-up or (indirect cost burden) on your cost then revenue minus expense is zero, but still want to see how much revenue is billed to customer vs. cost separately. There is no tax difference.

Revenue minus expense = profit, which is what you pay taxes on.  So if there is zero profit then is zero tax. Combining the two by having them just zero out, removes visibility of the two separate transactions. 

I have been mystified 30 years as to why or how this benefits the process or financials or tax return or ?  This is just plain wrong in my industry, so curious how or why others see this as what they want to do??

Regarding the steps to change your settings to track billable expenses as income, when do the expenses show as income on the income statement?  In reading some of the other comments on the post, does QuickBooks create a COGs convert that expense account into a COGs account?  When does the income offset the expense?  When the customer is billed the expense?  

Hi there, PacksDiner9.

The billable expenses will show in your income statement once you create an invoice. Check out this article for more details: Enter Billable Expenses. 

QuickBooks will increase the amount in your COGS account if a sale (invoice and sales receipt) is made. Please take note that you need to assign the COGS account in the Expense account field when setting up your products and services. Check out these articles for more details:

• Understand Inventory Assets and Cost of Goods Sold Tracking
• How To Set Up Products And Services

Also, when when both the billable expenses and invoices are created, you will see both income and expenses in your income statement. The invoices or sales under the Income section, while the billable expenses under the Expenses section. The program will then subtract the expenses from your gross sales to generate your net income. 

The Community is always here and willing to help you again if you need anything else. 

Thanks for your response.   I just want to make sure that when I invoice my customer the reimbursable expense will populate to income GL account.  When I enter the expense or credit card charge as billable, will it show on P & L as expense account?    Previously we were using COGs to record the reimbursable expenses and did not mark them as billable.  We created an income item on the invoice which flowed to an income GL account.  I want to use the billable expense feature to track these reimbursable expenses and do away with using COGs all together.  I just want to verify that GOGs wont be affected as long as I don't utilize the COGs account for my reimbursable expenses.  

Hello there, @PacksDiner9.

Allow me to share some details about the billable expenses and the 

The billable expenses will show in the Profit and Loss report. They're marked as expenses and income.  But one washes the other out wherein the expenses will offset the income for you. 

Also, when you buy inventory items, they will reflect in the asset account. The Cost of Goods Sold (COGS) will be realized when selling an item.

Base on your previous set-up, I would recommend contacting your accountant for further details to ensure your books are accurate. 

I've added an article to know more details on how QuickBooks handles inventory assets: Understand inventory assets and cost of goods sold tracking. This also contains a set of computations on how to get the average cost to determine the value of your inventory and the amount debited to COGS.

I'll be here if you have other questions. Please don't hesitate to let me know in the comment section. Take care!

Interesting and looks easy.  Newbie question - how did you link income and expense accounts?  I do this manually and I need to just remember.  Is there a way that you do this more automated?

Hi there, tory-brogan.

The option to link an income and expense account is unavailable in QuickiBooks. Since, these accounts are money-in and money-out, linking them can resolve to account imbalance.

I've added this reference for more information about accounts in QuickBooks: Learn about detail types in chart of accounts.

I'm just a post-away if you need help. Take care!

If you add a pass through expense (billable expense) on an invoice it counts it as revenue received... I understand that setting up an expense account to offset the revenue from the invoice will zero out on the bottom line net revenue, but doesn't this inflate your gross revenue? 

Hi there, @Doncrum1. 

I appreciate you for chiming in the thread.  I'm here to answer your question regarding billable expense. 

Yes, once the option to track billable expenses and items as revenue feature under the Bill and expense is set on, your gross income will increase.

Revenue is generated when you invoice your customer for the billable costs. The billable expenses are any revenue generated in relation to purchases a business makes on behalf of a client or customer. 

For other related articles you can use in the future, you may also refer to this helpful link: Income and expenses for QuickBooks Online.

You might want to review all your sales transactions made in QuickBooks Online. You can go to the Sales menu and select All Sales.

If you have any other concerns, feedback, or questions, don't hesitate and come back to the Community. I'm always here to help you. Have a great day.

If you want to track that what you bill is what you receive you have to use ITEMS..Since is a pass-through with no income to your company, what you do is after you pay the contractor and check the BILLABLE box when is time to bill your vendor (the company that reimburse you) click on a tab called REPORTS and ITEM LISTING link..Click on all of them related to your contractor...Now you have linked your contractor expenses to the reimbursement you are looking for...That is a great accounting and QB is great!

Ive been on Chat for 3 hours... I went through minimum 3 different people ( I can tell by their spelling) and nobody can tell me how to reimburse my employee and mark that as billable without having a duplicate expense in my P&L. 

It isn't the kind of experience we want you to come across with our chat support, cmoulton.

I'm here to share more information about creating a reimbursement.

With QuickBooks, the process of creating a reimbursement is through payroll. If you want to make it billable, you could have created an expense or check transaction. Then, tick the BILLABLE field. 

In your case, it seems you already added a reimbursement. If you still create a check or expense transaction, it will cause a duplicate.

Here's an article for the details of reimbursing an employee: Reimburse an Employee in QuickBooks Online.

I've also added these articles that outline how QuickBooks process your taxes:

• Payroll taxes and forms QuickBooks Payroll does for you
• Manage automatic tax payments and form filings

You can always post in the forum if there's anything that I can help you with.