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Alire_25
March 24, 2023
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Rental Expense without processing a payment

  • March 24, 2023
  • 2 replies
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I have a client that rents part of a building for his shop area.  The owner of the building and my client have made a verbal and written agreement that my client will perform a set amount of work (only labor) to cover the cost of the rent for this section of the building.  My client has been making invoices to show the work being perform and to track the billable labor that will cover this set amount per month.  How do I properly categorize this and show the rental expense as being paid?  Currently, the owner of the building is showing as both a customer and a vendor (slight name difference).  I have been making credit memos on the customer side of things, to show invoices as paid, and then creating a bill, that is the same amount as the work performed, for the rent and showing it as paid.  I forsee this creating an issue when reconciling his bank account in QB Online.  So how can I go about showing this expense properly so that it doesn't through off his books?

Best answer by Rainflurry

@Alire_25 

 

If the rent expense exceeds the work credit, then receive the payment for the work invoice to the barter bank account.  Then, pay down the rent bill by the amount of the work credit.  That will zero out the barter account and leave a balance due on the bill for the difference.  Then, pay the remaining balance due on the rent bill from your client's bank account.  No journal entry is required:-).

2 replies

R
rvrfrf
March 24, 2023

Welcome to the Community, Alire_25. I appreciate your detailed information.
 

You can use billable expenses to show rental expenses as having been paid. A billable expense is an expense you incur on a customer's behalf when you perform work for them. They can be used to record and track expenses so the customer can reimburse them when they receive their invoice.
 

Initially, you'll need to turn on billable expenses.
 

Here's how:
 

  1. Use your Gear (⚙️) icon, then go to Account and settings.
  2. Access the Expenses tab.
  3. Find your Bills and expenses section and click its Pencil (📝) icon.
  4. Turn on Show Items table on expense and purchase forms, Track expenses and items by customer, and Make expenses and items billable.
  5. Set a Markup rate, Billable expense tracking, and Sales tax charge if necessary.
  6. Enter Bill payment terms.
  7. Select Save.

 

Now you'll be prepared to enter billable expenses and add them to invoices.
 

Please don't hesitate to send a reply if there's any additional questions. Have a wonderful Friday!

A
Alire_25Author
April 2, 2023

I know what a billable expense is and how to use it, but not sure how that would help in this situation.  He doesn't accure billable expenses that he could bill to the bill to the landlord.  It is only labor that he invoices out to track what he works labor wise for the landlord that goes towards his rent.  Thank you for the sugeestion!

Rainflurry
Rainflurry
March 25, 2023

@Alire_25 

 

Since your client is trading labor for rent, the rent is an expense and the labor provided is income.  Create a bank account called 'Barter Exchange' or 'Barter Control'.  Enter the bill for rent and pay it using the Barter bank account.  Then, create an invoice to issue to the landlord for the labor provided.  Receive payment on the invoice using the Barter bank account.  That will book income and expense for the barter and the Barter bank account should be $0 after the transactions.  The only expenses that reduce net income for your client are the actual expenses your client incurs in performing the labor like supplies, etc.       

A
Alire_25Author
April 15, 2023

Okay, so a few questions on this suggestion. What happens when the labor performed doesn't equal the amount of the rental expense and the client has to cut a check to pay the remaining amount?  This has to be shown in the main bank account to be able to reconcile that register, so is a journal entry then made to balance the barter bank account? 

Rainflurry
RainflurryAnswer
April 15, 2023

@Alire_25 

 

If the rent expense exceeds the work credit, then receive the payment for the work invoice to the barter bank account.  Then, pay down the rent bill by the amount of the work credit.  That will zero out the barter account and leave a balance due on the bill for the difference.  Then, pay the remaining balance due on the rent bill from your client's bank account.  No journal entry is required:-).

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