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Anonymous
Not applicable

Reimbursable expenses, unearned income? Help Please

I'm not sure if I am calling it the right thing as I know it technically is unearned income, however I have to invoice first and the only thing I have seen is that when you make the unearned income account you do not invoice first so I don't know how to set that up to work for my business. I invoice clients for filing fees that I then pay on their behalf. I need to be able to have an account that when they pay these fees it shows in a report for each client and then when I pay them it shows on the same report by client to zero it out. That way I can make sure I don't miss anything. I am sure this is simple and I am completely overlooking something but I just can't get it. Thanks!!

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Best answer 12-31-2018

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Highlighted
Moderator

Re: Reimbursable expenses, unearned income? Help Please

Hello, daniellerc1983.

Allow me to provide some information about retainers in QuickBooks Desktop.

 

Ideally, all Inventory and assembly items have three accounts:

  • Expense = COGS
  • income = your Sales income Account
  • Asset = inventory Asset

The reason why you're income is not showing on your P&L report is that you're items are under the 'retainer' account which is a current liability account. However, I'd suggest consulting an accountant to help and guide on how to show that income on your P&L report. Your accountant can provide more expert ways of dealing with this concern.

 

Also, you can check out this article on how retainer works in QuickBooks Desktop: Manage upfront deposits or retainers.

 

As always, you can reach out to our QuickBooks Desktop Support if you need further assistance. Our contact details can be found here along with our opening hours:

  1. Go to: https://help.quickbooks.intuit.com/en_US/contact.
  2. Choose your QuickBooks Product.
  3. Select your QuickBooks version.
  4. On the Contact Us page, click a topic.
  5. Click on the Get Phone Number button to see the support number.

Please continue to reach out to me if I can be of help while you're working in QuickBooks Desktop. You have a wonderful day!

View solution in original post

7 Comments
Level 15

Re: Reimbursable expenses, unearned income? Help Please

Are you a Law Firm? If so, you are describing Advanced Costs, not income (deferred or not). And a law firm Pre-bills for Retainers. Example:

 

You have an Other Charge type item linked to Client Retainers Liability account. This item is listed on a Sales Receipt for the date I signed our contract and handed you the retainer that you deposit to Trust bank. Or, you Invoice my office with that item, and my payment arrives later.

 

Now, to match IOLTA Audit, the Trust Bank and Client Retainer Liability match balances by name.

 

Meanwhile, you have Service Items linked to one Other Current Asset account. The Account is named Advanced Costs. The Item(s) are whatever you want, such as Filing Fees, Expert Witness Fees, etc. This is Not the same as your own income-linked items, as Legal Fees, Mileage, etc.

 

You list the Service item for Filing Fees on the payment to the court on the Items tab, job track the Client here and this is Billable. You do this for the Costs you incur that are not your expense.

 

Then, you Invoice me, using the Add Time & Costs button. You select all of the Advanced Costs I will be repaying, plus your own Billable time (from timesheets or just manually added here).

 

If you intend to apply my retainer, that is done as: Issue a Trust Bank check to the firm, and on the items tab, list the Retainer prepaid item here (or make one for Retainer Requested/Received and another for Retainer Applied/Returned). Job Track that it is My amount. You can list multiple Client funds here, using this one Trust Bank check.

 

Now you showed that Trust Bank and Retainer Liability still match, by name. The only Trust Bank activity is in and out related to that liability.

 

And now you have a Check, to process as if that came in the mail or was handed to you by your Trust Department. Process each job listed on it as a separate Receive Payment. That pays the invoice.

 

You will need some custom reports filtered on the Retainer Liability account, and the Trust Bank, and set to total by name, to manage client balances. You also need to reconcile Trust Bank to Bank statements, but the Retainer Liability account is reconciled always using only an ending balance of 0, because the custom report set to Total by Name shows a name is at 0, and you clear only the activities for the name at 0. That's why I make two versions of the custom report; one is titled All Activity and one is titled Current Client Retainer Balances and filtered on Cleared Status = No.

 

If you are not a law firm and do not have a Trust Bank requirement, it is a bit different. You can put the Prepayment item on a Credit Memo to apply to the invoice, each time you Charge them. One Credit Memo can be used to list my entire prepayment, because there are two icons at the top: Apply to Invoice, and/or Issue as Refund. You can do Both, from here. You still would use custom reports total by Name, filtered on that liability account.

Level 1

Re: Reimbursable expenses, unearned income? Help Please

I am not an attorney although it would be advanced costs as you said. Many of my clients I never meet, I have to invoice through quickbooks in order to ever receive a payment. I have many items on my invoice list but only 1 is completely "profit", the other invoice items are amounts they pay me that I will pay on their behalf. I tried the liability account but then it wasn't showing up right since I had to have the invoice made first it was showing open balances for the clients I tried to set that up for. When I set the line item to other charge, liability, I couldn't figure out how to do the general journal entry it to where it would move accounts from liability to income.  

 

I think that what we do would be very close and even though we don't have a trust the first way you described everything should still work right? I will test it out as soon as I get all my filings done today. Thank you!

Anonymous
Not applicable

Re: Reimbursable expenses, unearned income? Help Please

Sorry, apparently I have 2 logins.  I have figured out how to do this "somewhat".  So now I have the invoice items that are actual costs I pay going into a "retainer" current liability, then when I pay those items out they decrease the "retainer" account. I have one last question... Now these don't show as income and I don't show the expense when I run my P&L, are these now items that I don't include on my taxes? Is there something I am missing here? Thank you!

Highlighted
Moderator

Re: Reimbursable expenses, unearned income? Help Please

Hello, daniellerc1983.

Allow me to provide some information about retainers in QuickBooks Desktop.

 

Ideally, all Inventory and assembly items have three accounts:

  • Expense = COGS
  • income = your Sales income Account
  • Asset = inventory Asset

The reason why you're income is not showing on your P&L report is that you're items are under the 'retainer' account which is a current liability account. However, I'd suggest consulting an accountant to help and guide on how to show that income on your P&L report. Your accountant can provide more expert ways of dealing with this concern.

 

Also, you can check out this article on how retainer works in QuickBooks Desktop: Manage upfront deposits or retainers.

 

As always, you can reach out to our QuickBooks Desktop Support if you need further assistance. Our contact details can be found here along with our opening hours:

  1. Go to: https://help.quickbooks.intuit.com/en_US/contact.
  2. Choose your QuickBooks Product.
  3. Select your QuickBooks version.
  4. On the Contact Us page, click a topic.
  5. Click on the Get Phone Number button to see the support number.

Please continue to reach out to me if I can be of help while you're working in QuickBooks Desktop. You have a wonderful day!

View solution in original post

Level 15

Re: Reimbursable expenses, unearned income? Help Please

You seem to have an odd understanding of the business activity. There is no such thing as, "I have many items on my invoice list but only 1 is completely "profit""

 

You are confusing Gross and Net. If you have no Trust requirement, then you described Gross Revenue.

 

"the other invoice items are amounts they pay me that I will pay on their behalf."

Again, you would have Gross Income, and then you pay out Gross Expenses. Your reporting shows Net, or Profit. Just because you Charge someone, a cash Basis entity just got Income. Just because you pay for things on their behalf, that is typical of Gross Expense. A Remodeling builder does the same thing: Buys materials and hires subcontractor labor, makes you pay, and this is their Business Operation. That is Gross Income when you pay them and their Gross Expense when they pay for the materials and outsource labor.

 

You need to ask your own CPA:

Am I running Gross Income and Gross Expense? Or do I have a Liability requirement here?

Level 1

Re: Reimbursable expenses, unearned income? Help Please

Forgive my terms or my "odd understanding". You however don't understand my business either. The majority of items that I invoice for are for expenses I pay out on their behalf at a later date. I was just trying to better track those items.  You have a misunderstanding in what I originally asked I guess. Thanks!

Level 15

Re: Reimbursable expenses, unearned income? Help Please

Forgive me for trying to help you understand your own accounting needs (not your Operational concept, but legal and accounting requirements) by helping you better defining what makes the difference for what you asked.

 

This is what we All Do: "The majority of items that I invoice for are for expenses I pay out on their behalf at a later date."

 

But some operations must carry the prepayment as Liability, and the payout clears the liability = Law Firms and Landlords that have security deposits.

 

Some operations have the prepayment as Liability until they earned the right to Keep it as income = an accrual basis entity that gets Grants.

 

Some operations get paid, and even though that is a Prepayment, we must report it as Income and then we Spend, and we report that as gross Expense. For instance, Cash Basis tax entities.

 

And if you do not know your accounting requirement, it is time to ask your own CPA about your operations.

 

Think about the grocery store, that sells to you, then pays the supplier. That is Gross Revenue and sales, and Gross expense as cost of goods sold. So, what you Described, is not how you need to manage your Data.

 

This is why you find a CPA for professional guidance to know your needs.

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