invoicing non-gainful *expenses* for reimbursement

[Keith A. Milner]

On Sunday 24 Jul 2011 18:18:24 William Colls wrote:
> Strictly, even though the item is an expense, it should show up in your
> income accounts. Perhaps create an account income:expense_reimubursement
> to capture it.
> 
> For accounting purposes, the purchase of the materials should show up in
> your cost of goods sold expenses, and the gross profit will be correct.
> 

Yes, this is spot on. I have an income account called "Reimbursed Expenses".

Note that in some regimes (like here in the UK) you may be required to treat 
reimbursed expenses as if they were pure income for tax purposes. Clearly you 
don't make any profit on them, but this is accounted for as William describes 
above, but it normally should be considered part of your turnover. You would 
normally include this on your invoice along with any other charges (and 
Gnucash supports that).

More importantly, if you are required to collect sales taxes/VAT on your 
sales, your expenses may be included in this.

For instance, here in the UK if I purchase a train ticket (zero rated for VAT) 
if I reclaim this from my customer, I have to charge 20% VAT on it. This is 
because I am VAT registered and my normal goods and services are liable for 
VAT at 20%.

Note for UK businesses out there, this is a very misunderstood point. I asked 
several other colleagues of mine who run their own business, and less than one 
in 10 got this point right, and some had been in business for several years. 
If HMRC audits them they would likely be required to pay the missing VAT and a 
fine. I have also had companies who I invoiced querying this as noone had 
previously invoiced them this way.

These rules apply to the UK tax regime and YMMV in different tax regimes, but 
hopefully this helps to emphasise that reclaimed expenses are, in fact, 
business income.

Cheers,


-- 
Keith A. Milner