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.

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!

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?

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!

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.

Rose MarjorieA:

*Your=Possesion

*You're= You are

As if she didn’t know that!!

This business person, "they", pays for materials, or services, and they are reimbursed, by the customer, dollar for dollar. They also are paid a fee, since they facilitated this transfer of materials/services. They would like to know, and show, in Quickbooks, 1) what are totals that they have paid, and have been reimbursed for, for transfer of materials/services, and 2) what the fee is that they have been paid.

It would be nice for these dollar figures to show up, by client, separately, for both 1) and 2), in reports such as Profit and Loss, and Sales by Customer. How is that done?

Hello there, BookieDog.

Expenses are items or services you paid for are categorized to the expense accounts. However, these expenses 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.

We'll begin by creating income account for service fee through chart of accounts. Here's how: 

1. Go to Lists at the top menu bar, select Chart of Accounts.
2. Right-click and choose New.
3. Select Income in the Categorize money your business earns or spends section.
4. Choose the other necessary details, click Continue
5. Enter the Account name, Description, and etc.
6. Click Save and Close.

Next, let's create item for materials added in QuickBooks and make sure that is set-up with income and expense accounts (sale and purchasing info).

1. Go to Lists at the top menu bar, choose Item List.
2. Right-click the page and select New.
3. Enter necessary details, then pick an Income account in the Account drop-down.
4. Click Ok.

Let's create Service item and associate the income account and make sure to select the Service type. 

1. Click Lists at the top menu bar and choose Item List
2. Press CTRL+N on your keyboard or right-click then click New.
3. Select the Service as the Type.
4. Enter the item name.
5. Choose the correct account.
6. Hit OK.

Once the product and services item entered, let's create a bill and make it billable to your customer. Then, turn that billable expense into an invoice.

1. Enter a bill.
2. Add all the necessary information.
3. Make sure to include your customer from the line item, then mark it as Billable.
4. Hit Save & Close.
5. Click the Customers tab at the top menu bar and select Create Invoices.
6. Choose the customer you want to bill from the Customer: Job drop-down.
7. In the Billable Time/Costs popup message, select the first option, and press OK.
8. Go to the Items tab, then put a check mark on the line items you want to bill to the customer.
9. Click OK.
10. Once you click OK, it'll automatically show the descriptions from the bill. 

Once done, you can then pull up your Sales by customer detail report and make sure to add the account column by customizing it. 

1. Go to the Report menu and Choose the Report Center.
2. From the Search Box, enter the Sales by customer detail report.
3. Double-click on the Sales by customer detail report.
4. Click the Customize Report button.
5. Check the Account type from the columns and then Hit Ok. 

I've also included some articles in case you need some ideas about tracking billable expenses, as well as how to customize reports:

• Enter bills in QuickBooks Desktop.
• Add, edit, and delete items.
• Customize reports.
• Income and expenses.

Don’t hesitate to let me know if you have any other questions or concerns with your billable expenses. I’ll always be around to help.