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+1-802-778-9005Tracking expenses is one of the keys to good budget management and profit growth. If you don’t track your expenses correctly, you can underestimate or overestimate your revenue as a result, you’ll miss out on deductibles during tax season and disrupt your cash flow.
Expense tracking affects your employees as well, particularly when you reimburse them for their out-of-pocket business expenses, such as business meals, industry education, supplies for in-office or remote work, travel costs, and much more. Managing these employee reimbursements properly is also a way to save money.
With QuickBooks, you can simply record expenses and reimbursements as well as balance your expense budget before it becomes too complicated to control.
Reimbursement is non-taxable payments you pay to your employees if they’ve paid business expenses out of their own pockets. This type of payment doesn’t appear on any of your payroll tax forms. For guidelines on reimbursements, check the Employee business expense reimbursements section of IRS Publication 15, Circular E — Employer’s Tax Guide.
Reimbursement generally refers to the process of compensating an employee for expenses they have incurred on behalf of the company. This can include travel expenses, office supplies, or other business-related costs. Recording reimbursement is crucial for accurate financial reporting and better cash flow management.
In QuickBooks, reimbursed expenses can be categorized and linked to specific employees, making it easier to manage and monitor the company’s expenses. This tracking helps in maintaining transparency and accountability in financial transactions. It also ensures that all reimbursed funds are accurately reflected in the financial records.
If you want to reimburse a personal expense, it is recommended to record it as a check or an expense. To record a reimbursement in QuickBooks Online, first use a Journal Entry to record the business expense paid with personal funds. Then, choose to reimburse via Check or Expense, selecting the appropriate bank account and entering the amount. Save and close.
Let’s see how:
To record a business expense paid with personal funds in QuickBooks Online, create a Journal Entry. Debit the expense account and credit Partner’s or Owner’s equity with the same amount, then save and close.
Follow the step-by-step information given below:
Step 1: Select Journal Entry
Click + New and then choose Journal Entry.
Step 2: Add the Expense account for the purchase
Select the expense account for the purchase on the first line.
Step 3: Type the Purchase amount
Enter the purchase amount under the Debits column.
Step 4: Opt for Partner’s equity or Owner’s equity
On the second line, click on Partner’s equity or Owner’s equity.
Step 5: Enter the same Purchase amount
Type the same purchase amount in the Credits column.
Step 6: Finishing up
Press the Save and Close buttons.
You have two options for reimbursements. To reimburse personal funds in QuickBooks Online, select + New > Check, choose the bank account, add Partner’s or Owner’s equity in the Category column, enter the amount, and save.
Step 1: Select Check
Click + New and then select Check.
Note: If you’re in a Business view or want to switch to the Accountant view, follow these steps:
Step 2: Go for the bank account used to reimburse the personal funds
Choose a bank account used to reimburse the personal funds.
Step 3: Add Partner’s equity or Owner’s equity
Under the Category column, click on Partner’s equity or Owner’s equity.
Step 4: Type the Reimburse amount
Enter the amount to reimburse.
Step 5: Finishing up
Hit the Save and Close or Save and New icons.
Step 1: Select Expense
Click + New and then choose Expense.
Step 2: Go for the bank account used to reimburse the personal funds
Select a bank account used to reimburse the personal funds.
Step 3: Add Partner’s equity or Owner’s equity
Under the Category column, click on Partner’s equity or Owner’s equity.
Step 4: Enter the Reimbursement amount
Type the amount of the Reimbursement.
Step 5: Finishing up
Press the Save and Close buttons.
Record an owner’s expense reimbursement in QuickBooks Online, first use a Journal Entry to debit the expense account and credit Owner’s Equity. Then, record the reimbursement via Expense, choosing the appropriate bank account and Owner’s Equity, and save.
Follow the step-by-step information given below:
To record a business expense paid with personal funds in QuickBooks Online, create a Journal Entry, debit the Expense account, credit Owner’s Equity or Partner account, and save.
In QuickBooks Online, Hit the Plus (+) icon and then choose Journal Entry.
On the first line, type an Expense account and debit the amount of the expense.
Choose Owner’s Equity or a Partner account and then credit it for the same amount.
Press the Save and Close buttons.
To record an owner’s reimbursement in QuickBooks Online, go to + New > Expense, select the bank account used, choose Owner’s Equity, enter the amount, and save.
Hit the Plus (+) icon and then click on Expense.
Choose the Bank account used for the Reimbursement.
Select Owner’s Equity or a Partner account and then type the amount in the first line.
Press the Save and Close tabs.
You can make a retainer deposit to track the cash you’ve received from your client and then record the money you spend in which your clients reimbursed you as a reimbursable expense transaction.
For this, go through the steps listed below:
Once done, create an invoice and then link the billable expense.
Let’s see how:
If your employees used their personal funds to pay a business expense, you can pay them now or record the expense first and pay them later.
Below are the steps you must follow:
To pay your employee, go to + New > Check or Expense, select the employee’s name from the Payee drop-down, choose a liability account, and save.
Step 1: Select Check/Expense
Click + New and then choose Check or Expense.
Step 2: Locate the employee’s name
Hit the Payee drop-down and then find the name of your Employee.
Step 3: Opt for the liability account
Select the Category drop-down menu and then add a liability account.
Note: If you don’t have one yet, you can choose a new account. However, if you’re using Online payroll, you have the option to create a reimbursement account.
Here are the steps to be followed:
To add a new account, go to Settings > Chart of Accounts, click New, enter the account name, select Account and Detail types, optionally set it as a sub-account, enter the opening balance, add a description, and save.
Step 1: Go for the Chart of Accounts
Click on Settings and then select Chart of Accounts.
Step 2: Click New & Type your Account name
Press New and then enter the name of your Account.
Step 3: Select an Account type and Detail type
Choose an Account Type and Detail type from the dropdowns.
Step 4: Mark Make this a Sub Account
Tick mark Make this a sub account. If this account is a sub-account and then select the Parent account it should be under.
Step 5: Enter the Opening Balance and fill out the starting date
If you select a Bank, Asset, Credit card, Liabilities, or Equity account, enter Opening Balance, and then type the starting date under the As of field.
Step 6: Write a Description
Add a Description to add extra information about this account (Optional).
Step 7: Finishing up
Hit the Save tab.
Create a taxable reimbursement item, go to Payroll > Employees, select the employee, click Start/Edit, choose Reimbursement, add a new pay type if needed, enter the amount, rename if desired, and save. Add additional details like billable status and customer if applicable.
Step 1: Navigate to Payroll & Employees
Hover over Payroll and then select Employees.
Step 2: Select the Employee
Choose the Employee.
Step 3: Click Start/ Edit
Click either Start or Edit from Pay types.
Step 4: Opt for Reimbursement
Scroll down to the Additional Pay Types section and then choose Reimbursement.
Step 5: Add a new Reimbursement pay type
Add a new reimbursement pay type in the Common pay types section drop-down if there’s an existing one. Just click + Another Reimbursement type to add new.
Step 6: Enter the amount
Type the default amount or leave it blank, and just enter the amount as you run payroll.
Step 7: Rename the pay type
Hit the Edit icon next to Reimbursement to rename this pay type.
Step 8: Finishing up
Press the Save button when you’re finished.
Type other details
Enter some other information, including:
Note: The Customer and Billable fields are not available in QuickBooks Online Simple Start, but in QuickBooks Online Plus and Advanced, you may enable this feature.
Step 5: Finishing up
Press the Save or Save and Close buttons.
To record an expense for future payments, create a Journal Entry. Credit the liability account for the amount owed, debit the expense account for the purchase, and save.
Step 1: Select Journal Entry
Click + New, and then choose Journal Entry.
Step 2: On the first line:
Select your liability account under Account.
In Credits, enter the amount you owe your Employee.
Navigate to the Name drop-down menu and then locate the name of your Employee.
Step 3: On the Second line:
Select the expense account that fits the purchase your Employee made from the Account section.
Under Debits, type the purchase amount.
Step 4: Finishing up
Hit the Save and Close icons.
After recording your Journal Entry, you can now pay them using a check/expense.
If you haven’t paid your Employee in full, you can run a Transaction detail report to know how much you still owe them. To check unpaid employee amounts, run a Transaction Detail by Account report: customize the report, set the period, group by Employee, select the liability account, add the employee’s name, and run the report.
Adhere to the following steps:
Step 1: Look for Transaction Detail by Account
Hover over Reports and then search for Transaction Detail by Account.
Step 2: Click Customize
Open the report and hit the Customize tab.
Step 3: Select the Report Period drop-down and the range of your transaction
Click on the Report period drop-down under the General section and then select the range of your transaction.
Step 4: Choose the Group By drop down and Employee
From the Rows/Columns section, select the Group By drop-down menu and then Employee.
Step 5: Opt for the Distribution Account drop-down and set up the Employee Reimbursement account/ the liability account
Choose the Distribution Account drop-down in the Filter section and then select the Employee Reimbursement account or the liability account that you’ve created.
Step 6: Hit the Employee drop-down & add your employee name
Select the Employee drop-down and then enter your Employee’s name.
Note: If you want the report to show what you owe all employees, leave this set to All.
Step 7: Finishing up
Press the Run report at the end.
If your employees used their personal funds to pay a business expense, it is advisable to record the expense when it is accrued and pay them later.
Here’s how:
You need to first record the expense before paying your employees. Set up a Liability Account to record expenses when employees report them.
Follow these steps to set up a new account:
Step 1: Add the Account
Set the account type as Liabilities.
Step 2: Save your Account
Under Other Current Liabilities, save the Account.
Step 3: Set your tax form
Mark your tax form section as Other Current Liabilities.
Step 4: Give your Account a unique name
Provide your Account a name that makes sense to you, such as Employee Expense Reimbursements Payable.
Step 5: Finishing up
Press Save.
Step 1: Select Journal Entry
Click + New and then choose Journal Entry.
Step 2: On the first line
Step 3: On the Second line
Step 4: Finishing up
Hit the Save and Close icons.
After recording the expense, you can now pay your employee through Payroll.
You are recommended to set up employee reimbursements in your Payroll. To set up employee reimbursements in QuickBooks, go to Payroll & Expenses, select the employee, and choose Reimbursement under Pay Types. Review your reimbursement mapping in Payroll Settings, then add the reimbursement amount during payroll processing.
Follow the step-by-step information given below:
To add or edit pay types in QuickBooks, go to Payroll & Expenses, select the employee, choose Reimbursement under Common Pay Types, leave the recurring amount blank, and click Save.
Step 1: Navigate to Payroll & Expenses
Head to Payroll and then select Employees.
Step 2: Select the Employee
Choose your employee.
Step 3: Click Start/ Edit
Press either Start or Edit from Pay types.
Step 4: Go for Reimbursement
Select Common pay types and then click on Reimbursement.
Step 5: Leave Recurring Amount Blank
Leave your Recurring Amount blank.
Step 6: Finishing up
Click on Save.
To review reimbursement mapping, go to Payroll Settings, edit Wage Expenses, select your Reimbursement liability account, and save. When running payroll, add the reimbursable amount to ensure payment.
Step 1: Go to Payroll Settings
Move to the Gear icon at the top right and then click on Payroll Settings.
Step 2: Click on the Pencil icon
In Accounting, hit the Pencil icon.
Step 3: Browse to Wage Expenses
Scroll down to Wage Expenses and then choose the Pencil icon.
Step 4: Scroll down to Reimbursements & select the liability account
Go through Reimbursements and then select the liability account you made earlier.
Step 5: Finishing up
Press Save and then Done.
When you next run Payroll, add the amount to be reimbursed under the Reimbursements box. So, your employees will then be paid.
Reimbursement is when a business pays back an employee, client, or other people for money they spent out of their pocket or for overpaid money. Some examples are getting money back for business costs, insurance premiums, and overpaid taxes. Whether you are a small business owner, accountant, or bookkeeper, recording reimbursements is essential for maintaining accurate financial records and transparency in the books.
Disclaimer: The information outlined above for “How to Record Reimbursement in QuickBooks Desktop and Online?” is applicable to all supported versions, including QuickBooks Desktop Pro, Premier, Accountant, and Enterprise. It is designed to work with operating systems such as Windows 7, 10, and 11, as well as macOS.
