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how do you recorded expense paid in advance, then reimbursed

Vanessa Rhodes's Profile

Have a small promotion/consulting business, I sometime have to pay artist fees and travel expenses in advance but reimbursed almost dollar for dollar by third party promotor. How should these expenses be treated on my business P&L and how should the reimbursement be treated.

They have historically recorded all payments as expenses. I'm trying to prepare formal financial statements after the fact. It would be nice to advise the correct treatment of these transactions going forward.

 

Answers

Usman Shakir
Title: Chief Financial Officer
Company: NIKA Architects + Engineers
(Chief Financial Officer, NIKA Architects + Engineers) |

If you are paying the artist in "advance" of the reimbursement from your vendor then the entries would be as follows:

1. Record the artist travel expenses as reimbursable ODCs (other direct
costs), which would be part of your total Cogs.

2. Record the same or estimated amount that you expect to collect as Reimbursable from your vendor as Reimbursable Expense Revenue.

There would be related AR and AP recordings that you would also need to recognize what you owe to the Artist and what you need to collect from your Vendors.

Also, if you truly pay the Artist in "Advance" of them performing service, you should begin by recording a prepaid expense.

Hope this helps. Good luck.

Anonymous
(Assistant Manager) |

1. Cash credit and Reimbursable expense debit
2. A/R Debit and Reimbursable Income credit
3. When you collect from the third party - the AR will be cleared against cash.

Vanessa Rhodes
Title: Sr. Accountant
Company: Accounting Services
(Sr. Accountant, Accounting Services) |

Yes, this is helpful as I'm preparing financial statements after the fact and the transactions were not handle correctly when entered.

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