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What Distinguishes a Reimbursable Expense From Other Expenses?

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A reimbursable expense is an expense that you expect to invoice to a customer or client either at the actual cost or with a markup.  QuickBooks includes features to distinguish reimbursable expenses from other types of expenses and to track which reimbursable expenses have in fact been invoiced to a customer. 

For more information on handling reimbursable expenses, see our related articles on enabling automatically invoicing customers for reimbursable expenses, invoicing a customer for reimbursable expenses, removing expenses from the list of billable expenses to be invoiced to a customer, and finding out which reimbursable expenses haven’t been billed to a customer.

In QuickBooks, the 4 principal ways to record expenses for a business are:

  1. Recording a vendor bill using the Vendor->Enter Bills menu selection
  2. Writing a check using the Banking->Write Checks menu selection or Ctrl + W keyboard shortcut
  3. Recording a credit card transaction using the Banking->Enter Credit Card Charges menu selection
  4. Via a General Journal entry using the Company->Make General Journal Entries… menu selection

When you record an expense using 1 of these 4 methods, you can associate line items on the transaction with one or more Customer:Jobs.  Doing so will enable you to analyze both the expenses as well as the revenues from a job.

When you add a Customer:Job to a line item on a check, vendor bill, credit card charge, or General Journal entry, QuickBooks will automatically put a check mark in the Billable? field.  That check mark in the Billable? field indicates this is a reimbursable expense to be invoiced to a customer or client.  If it’s not, simply remove the check mark by clicking on it.

Unfortunately, there’s presently no way to set the default for the Billable? field to being unchecked for those organizations who want to simply assign expenses to customers and not seek reimbursement.  Leaving this field checked won’t interfere with associating expenses with customers; it’s an important detail if your organization does want to use it to track reimbursable expenses. In either case, with a Customer:Job associated with the line item for the expense, you’ll be able to use QuickBooks to perform job profitability analysis, more commonly known as job costing.

The screens for each of the 4 principal ways to record an expense are shown below.  Here’s the Enter Bills window:

QuickBooks Premier 2009 Enter Bill Reimbursable Expense Tab

The Write Checks window:

QuickBooks Premier 2009 Write Checks Billable

The Enter Credit Card Charges window:

QuickBooks Premier 2009 Enter Credit Card Charge Billable

And the Make General Journal Entries window:

QuickBooks Premier 2009 Make General Journal Entries Billable

Note that the field where you enter the Customer:Job on the Make General Journal Entries window is actually called Name because General Journal entries can be recorded for an entity that isn’t a Customer:Job, such as a Vendor, Employee, or Other Name.

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How Does Quickbooks Handle Voiding a Check Dated In a Closed Period?

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When you void a check, QuickBooks:

  • changes the original amount of the check to 0.00
  • adds the text VOID: to the beginning of the Memo
  • sets the cleared flag, Clr

When you’ve specified that your books are closed through a given date, in addition to performing the above steps, QuickBooks gives you the option of automatically adding reversing general journal entries so that accounting reports for the closed period are not affected. However, this option to automatically add a reversing general journal entry comes with a big stipulation: the accounts associated with the check must be expense accounts. If they’re other account types, you’ll have to construct reversing general journal entries on your own.

A bill payment check is similar to a check, but it is actually a different transaction type. QuickBooks only provides the option to automatically reverse voided checks, not bill payment checks. Later in this article, we’ll describe how to manually make the reversing general journal entries when voiding a bill payment check from a closed period.

To see this process in action, first verify your Closing Date.  You can find it by clicking on the Company->Set Closing Date… menu selection.

QuickBooks Enterprise Solutions 10 Closing Date

For our sample company, the Closing Date has been set to 11/30/2013.  If you void any check dated on or before this date, QuickBooks will give you the option of automatically creating well-documented reversing general journal entries that will maintain the accuracy of your accounting reports for the closed period.

To void a check, you can either right click on the check in the bank account register to invoke the context menu and select Void Check or you can select the check in the register and choose Void Check from the Edit menu.  Both paths take you to the same destination.

QuickBooks Enterprise Solutions 10 Void Check

Since check # 5244 is dated before the Closing Date, voiding it will bring up this warning:

QuickBooks Enterprise Solutions 10 Void Old Check Warning

You have the option of simply voiding the check and not having QuickBooks create the reversing general journal entries.  Just click the No, just void the check button.  However, unless you manually create reversing general journal entries, financial reports from the closed period will no longer be accurate, since the check amount was just changed to 0.00.  Even if you intend to modify the reversing general journal entries (such as to add more information to the Memo), it’s a good idea to click the Yes (Recommended) button.

Clicking the Yes (Recommended) button causes QuickBooks to automatically perform these steps:

  • create a reconciled general journal entry on the date of the original check
  • create a reconciled, reversing general journal entry on the date you voided the check
  • add additional text to the Memo of the voided check to refer to the journal entries made

The general journal entry on the date of the original check:

QuickBooks Enterprise Solutions 10 Void Check Reversing Journal Entry 1

The reversing general journal entry on the date the check was voided:

QuickBooks Enterprise Solutions 10 Void Check Reversing Journal Entry 2

The updated memo on the voided check that refers to the general journal entries:

QuickBooks Enterprise Solutions 10 Void Check Memo

Note that QuickBooks automatically sets the Clr flag for both journal entries, just like it does for the voided check.  By doing so, voiding the check and recording the reversing journal entries will not interfere with your bank reconciliation.

Recording these journal entries preserves the accuracy of your financial statements for the closed period.  If you simply voided the check and didn’t record these entries, rent expense for the closed period would be lower than previously reported on your financial statements or tax returns.  That inconsistency can lead to questions about the reliability of accounting information and cause time to be spent trying to reconcile the difference.  Well-documented general journal entries eliminate the potential for inconsistency.

The reversing general journal entry puts a credit to rent expense in the current period.  If you were voiding the original check because it was never cashed and you now plan to issue a replacement, the credit and the replacement check will offset.  That way, your expenses (or the accounts on the original check) are not overstated in the current period.  If you were voiding the check and you don’t plan to reissue it, expenses for a closed period were overstated, and they’ve been adjusted in the current period – when the overstatement was discovered.

QuickBooks did a lot of work once you clicked on the Yes (Recommended) button.  But don’t forget that the entire process is triggered by setting your Closing Date.  If you haven’t done that, QuickBooks won’t go through these time-saving steps because it lacks the information to do so.

For bill payment checks, QuickBooks won’t automatically perform the steps described above, so you’ll have to go through them manually when voiding a bill payment check in a closed period. Those steps are:

  1. void the bill payment check, noting the vendor; voiding the bill payment check will turn the bill into an outstanding A/P balance
  2. record a general journal entry on the date of the original bill payment check with the first line on the journal entry as a debit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a credit to the bank account from which the bill payment check was written
  3. record a general journal entry on the date the bill payment check was voided with the first line on the journal entry as a credit to accounts payable; record the vendor in the Name column on this line; the second line of the journal entry is a debit to the original bank account
  4. use the Vendors->Pay Bills function to use the older general journal entry to pay the original bill
  5. pay the newer general journal entry in the normal course of business

It’s important to note that the procedures described here cover voiding – but not re-issuing – a check. If you need to re-issue a check, you’ll have to do so in the current accounting period. Voiding a bill payment check leaves a current accounts payable balance for you to pay in the current period. If you want to void a bill payment check in a closed period and cancel the original bill, you’ll need to record a bill credit in addition to the steps outlined above.

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