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maddyt
May 11, 2020
Question

Reimbursing employees and how to track these expenses

  • May 11, 2020
  • 3 replies
  • 0 views

(We are a small and new company. I am unfamiliar with Quickbooks and accounting.)

 

Regularly our employees are using their personal credit cards for minor and major purchases and we reimburse them (manually, via direct deposit or wire - not from Quickbooks as we are still setting up payroll, etc.).

 

I'm confused as to where and how these should be recorded in Quickbooks for accounting purposes... here's how it looks:

 

1. Employee buys gas for personal vehicle (exclusively for transport to and from job), meal out (covered room and board), trailer for company (large sum vehicle asset), small parts from hardware store. All of these are various expenses, COGS, or purchases of company assets.

2. Employee submits either an expense / reimbursement report / spreadsheet OR an invoice (as in instances of employees who are contracted instead of on payroll) for a lump sum repayment.

 

My question, is how do these get recorded in Quickbooks? Does it vary for employees vs. contracted employees? I was originally creating them as Expenses, but realized that these reimbursements were still "to be paid" by the company (as opposed to "already paid" expenses) - in certain instances I ran into issues with it being a double expense (once to the Expense category and once paid to the employee).

 

My solution was to treat each of these reimbursements as a "Bill" (with line items linked to appropriate Expense / Asset / COGS / etc. accounts) and then list each non-contracted employee as a Vendor / Supplier. I want to know - is this okay or will it cause issue on the financial report side of things down the line? Is there a better way to go about this? - if so, how? (I'm reading about liability accounts, but am somewhat confused as to how they operate and if they would apply here.)

3 replies

M
Mark_R
May 11, 2020

Thank you for the detailed information, @maddyt.

 

You're on the right track on creating an expense transaction to reimburse your employee's business-related expenses. However, you'll have to select a liability account to record it properly in your QuickBooks Online (QBO) account.

 

Also, to answer your question if it varies for employees vs. contractors, yes. To reimburse a contractor, you can create a bill and pay it. While for employees, you can create a check or an expense transaction.

 

You have two options to reimburse your employees. If you want to pay them on the day of the transaction, you can create an expense transaction and select a liability account.

 

But if you want to record the expense first and pay them later, you can create a journal entry for it. For more guidance, feel free to check out this article for the detailed steps and information: Reimburse an employee.

 

As always, feel free to visit our QuickBooks Community help website if you need tips and related articles in the future.

 

Please touch base with me here for all of your QuickBooks needs, I'm always happy to help. Have a good one.

    M
    maddytAuthor
    May 11, 2020

    Thanks, Mark! All clear on the contracted employees being paid via bills... that's easy enough and makes good sense.

     

    The reimbursement of employees, I think I've got, but maybe you could clarify. (To this point in time, employees were paid back and then the expense was recorded later so it doesn't really fit either example. Whoops!)

     

    (1) Add New > Journal Entry

    (2) List all purchases linked to correct expense account (or asset / COGS / etc.)

    (3) Save / Close

    ***Do journal entries debits / credits automatically link to the Accounts Payable account? Or, where do these pile up?

    (4) Add New > Expense

    (5) Pay reimbursement to Employee in lump sum Category: Accounts Payable (or whatever account contains journal entries)

    (6) Cheer and begin to assess next problem

    MaryLandT
    MaryLandT
    May 11, 2020

    Thanks for getting back to us, maddyt,

     

    I'm glad to clear things out for you. Debits and credits of your journal entries are linked to your liability accounts, not to the Accounts Payable one.

     

    You'll want to visit again this link: Reimburse an employee for instructions and detailed steps.

     

    If you're unsure about this, I highly recommend consulting your account. He/She might have specific instructions on what accounts to debit or credit. This is to ensure you have accurate employee reimbursement records in your books.

     

    Let me know if you need additional information. I'm always right here in the QuickBooks Community to help.

     

    Thank you and stay safe!

    S
    stalker
    November 5, 2020

    This is all great information! I am going to try it. Can I ask a question that complicates it even more?

     

    When we upload our Bank Statement, it shows multiple payments to one of our employees who does purchasing. These payments are to reimburse her for the purchasing. So, when I have the bank statement data in front of me and I am editing each line item to make sure it reflects the right Category, every line related to her account number takes on the last Category I put in! 

     

    How can I reflect that each line item that is a payment into her bank account is a payment to reimburse this employee AND still categorize the expense accurately?

    M
    Mark_R
    November 5, 2020

    Welcome to the Community, @stalker. And I appreciate the detailed information you've shared.

     

    I've got your back on categorising purchases made by your employee and reimbursing the payment.

     

    When your employee purchases something for your business, you should create an expense and categorise it with a liability account. This way, you'll record the reimbursement correctly in QuickBooks.

     

    Here's how:

     

    1. Click the + New button, then select Expense.
    2. Select the bank account to use to reimburse the payment made by the employee.
    3. In the Category column, select a liability account.
    4. Enter the amount of the reimbursement.
    5. Click Save and close.

    I'm adding this article for more details: Record the reimbursement as an expense.

     

    Most importantly, I still encourage seeking help from your accountant. They may add suggestions based on what's more suitable for your business and to your books.

     

    Please let me know if you need clarification about this, or there's anything else I can do for you. I'll be standing by for your response. Have a great day.

      R
      RCV
      January 18, 2023

      Let me guide you on how to reimburse an owner who paid for purchases on behalf of the business, JBlecka.

       

      We can perform some steps to record the payback to the company’s owner who did some payment on behalf of the company. We'll have to create first a Current Liability account to track the amount owing to the business owner for incurring expenses on its behalf. Here's how:

       

      1. Go to the Gear icon on the top menu.
      2. Choose Chart of accounts and New.
      3. Select Current liabilities from the Account Type dropdown, 
      4. From the Detail Type dropdown, choose Other current liabilities.
      5. In the Name field, type a relevant name such as 'Payable to the owner'.
      6. Press Save and close.

       

      Then, make an expense transaction and select the account Payable to the owner. Let me show you how: 

       

      1. Click the + New Plus icon. 
      2. Select Expense.
      3. Choose the Payee.
      4. From the Category dropdown, select the account Payable to the owner.
      5. In the Amount field, enter the total purchase amount as a negative figure. When done correctly, the amount at the top right should read $0, as no cash has left the business at this point.
      6. Press Save and close.

       

      Once done, we'll need to create a Transfer when you have paid back the amount. Here's how:

       

      1. Click the + New Plus icon.
      2. Select Transfer.
      3. From the Transfer Funds From dropdown, choose the name of the bank account used to pay the owner.
      4. From the Transfer Funds To dropdown, select the account Payable to owner.
      5. From the Currency dropdown, if required, change the currency in which it was paid.
      6. In the Transfer Amount field, enter the amount reimbursed.
      7. Press Save and close.

       

      Feel free to visit our page for managing your business in QuickBooks Online: QuickBooks Online Self-help articles.

       

      I'm just one click away if you have any additional QuickBooks-related concerns. I'm more than willing to assist you again to improve your experience here in QuickBooks. You have a good one. 

      J
      JBlecka
      January 18, 2023

      Thank you!

      C
      CharleneMaeF
      January 18, 2023

      Glad to know we're able to provide the solution that you're looking for, JBlecka.

       

      If you need additional help in managing and running reports, please let us know. We're always here to help you out.

       

      I've also added our View All Help article for future reference. There, you can search topics that'll help you in completing your other QuickBooks tasks.

       

      Have a great day ahead!

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