Which Expense account and which Income account for reimbursed and or per diem

ZacMaster · ‎June 12, 2020

Hello,

I am using QBO essentials (no billable expenses) for a consulting LLC and have been recording expenses two ways.

1) Expenses for running the business: Type Expenses, Detail Type Utilities or Insurance, or Travel, Meals, Car, etc. (separated out for each type)

2) Expenses incurred for a customer: Account Reimburseable Expenses, Type COGS, Detail Type Other costs of Services (which QBO defines as "use Other Costs of Service (COS) to track costs related to services you provide that don't call into another Costs of Goods Sold type." (Other types available are costs of labor COS, equipment rental COS, shipping COS, or COGS).

All of #2 get passed through to the customer with no markup. The balance sheet makes sense. If I bill $1000 in sales, but another $5000 in expenses, my gross profit shows $1000 instead of $6000. Also, my expenses make sense, $100 in gas one month for running the business is separate from "Reimburseable Expenses" which might include $1000 in gas for a customer.

I use two income types on my invoices:

A) Sales Income (Detail type Service/Fee Income)

B) Billable Expense Income (also Detail type Service/Fee Income)

First question: Is this correct so far?

Second Question: Instead of direct passthrough for expenses, we are going to start billing per diem and miles for vehicle travel. Should I scontinue to list my expenses under a "Reimbursable Expenses" account of type COS, or should I start seperating meals, gas, loding, etc. into each existing expense account?

Thanks in advance.

Teri · ‎June 13, 2020

@ZacMaster

COGS - Only use this if you have inventory (buy stuff, hold it and sell later).

COS - All other Direct cost (directly related to job or customer, billable or not).

Billable - Checkbox - If it is billable and you want to show on customer invoice.

Reimbursable Expenses - I would not even use this, not normal accounting, only in QB.

You already have these in section above. No need to split from those parameters IMHO.

Reimbursable expenses would be for example, you bill a customer for labor and travel.

Say the labor amount you bill for includes profit (fee, mark-up or whatever you call it).

Say the travel is only billable at actual cost, maybe you even must send expense report.

Some people want to separate the two above into separate Revenue (income) accounts.

Then you can see the Travel revenue is cancelled out by the Travel cost, not sure what for.

I can assure you that large companies don't do this, way too much hassle, plus they often

also add profit to Non-labor (Travel, Material, etc), so there would be not point to doing it.

QB also has a function that is weird to me and may be your problem here. You can select a

setting that posts the Reimbursable Revenue as a credit to the Reimbursable Expense vs.

revenue, and that reimbursable expense and revenue totally disappears, I was shocked the

first time I saw this. This is a setting, maybe under preferences, sorry not quite sure where.

So hopefully someone here can supplement my accounting response with QB menu map.

Second question: Since you plan to bill travel per diem and mileage rate vs. actual expense,

"Reimbursable" won't help much since we already know the amounts won't match up, right?

So this is also Direct cost, which is COS in QB, whatever category describes is best account.

Are you planning to bill that travel per diem and mileage manually or do you have a system to

compute these that creates invoice to send to customer? That may impact which accounts to use.

Sorry to confuse on terminology:

Sales = Revenue = Income (same thing with different names) =Amount you bill to customers.

Cost v Expense = Cost is usually Direct. Expense = Indirect, but they are used interchangeably.

Gross Profit = Gross Margin (Revenue minus Direct Cost and COS and COGS).

Net Profit = Net Margin = Net Income (Revenue minus Direct and Indirect Expense = Profit).

AR = Billing to customers who pay you (QB calls this Invoicing).

AP = Invoices from vendors for you to pay (QB calls these bills).

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Which Expense account and which Income account for reimbursed and or per diem

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