'Loans': Asset or Expense?

[Phil Longstaff]

On June 15, 2009 05:06:02 pm Christopher Stamper wrote:
> Hello all,
>
> Sorry if this is a stupid question - I don't profess to be an accounting
> expert. :-)
>
> I often find myself buying things for others, with the expectation that
> they will reimburse me. Previously, I had been recording this as a 'gift',
> and the reimbursement as 'other income'.
>
> Now, I'm starting to think this is a dumb idea. I want to have a record of
> what I am owed, so should I:
>
> -Create an expense account, 'For Others', and post the expense+reimbursment
> here
>
> OR
>
> -Create an assets account, and post the expense and re-imbursement?
>
> I have been using method 2 for large loans to single individuals. However,
> for this I want to have one catch-all account; anything else would be too
> cumbersome.

Money that is owed to you is an asset.

When I worked in a financial office, we had the rule that it was much better to 
separate out details using the chart of accounts, rather than have to scan 
through the transactions in an account.  If you use a single account which has 
transactions for things you buy and reimbursements, and want to know how much 
a particular person owes, you will need to scan through and isolate 
transactions for that person.  Therefore, you might want to have 1 sub-account 
per person.  The parent account (which should be a placeholder) will show you 
how much you are owed, and the individual sub-account balances will show you 
the balance for any particular person.  

Phil