Accounting Question

[Anthony]

On 10/14/06, Elizabeth Dodd <edodd at billiau.net> wrote:
> On Friday 13 October 2006 08:55, Crimson Corelio wrote:
> > Yeah, the idea of making it a transfer into an Income account occured to
> > me. But it's really not Income, right? Because it shouldn't be increasing
> > the value of my Assets or my Equity. And the credit card transfer
> > shouldn't be an Expense, because it's not actually decreasing my Assets.
> > Am i incorrect about how this should work in double-entry accounting?
> >
> > I can definitely make this work and balance just fine. But it seems to me
> > that that isn't the right way to do it
> consider the similar problem in which you add 10% to your expenses when
> charging them out
> then it would be income and expense
> the difference from that is that you don't add anything to the expense
>
The bottom line is, are you a reseller, or are you just lending your
customer/employer/whoever money for an expense that *they* are
incurring?  Depending on the details of the situation, I could see an
argument for either position.

> if you incur the expense and your employer doesn't reimburse you, how would
> you record it? I would think as an expense, which you hoped would be offset
> by income. Then you would have it correctly recorded when you wished to claim
> from the taxman.
>
Sure, but what is the expense?  Is it a travel expense, or is it a bad
debt?  If you incurred the expense for your own business purposes, and
you just counted on making up for it in your billing, then it's a
travel expense.  But if the travel expense was performed for the
business purpose of your employer (i.e. you loaned him the money), and
your employer just stiffed you for the cost, then it's a bad debt.

Consider also the tax implications of the two positions in the
scenario you presented (as an employee).  If your employer incurred
the expense, then your employer deducts it and you don't recognize any
income.  On the other hand, if you, as an employee, incurred the
expense, and your employer simply raised your pay to make up for it,
then you'd recognize income and an employee business expense, an
itemized deduction subject to the 2% AGI reduction.

Anthony