Employee Reimbursements

The first thing I would suggest is making sure that your CPA's trial balance as of 12/31/05 (or your fiscal year end) and the trial balance on QuickBooks matches (This is absolutely necessary). . .once that is done, you can move forward.

It sounds like you need to make one journal entry to reverse the expenses out of petty cash. (This is absolutely necessary).

I don't understand your CPA's comment about what is absolutely necessary. . .if you are matching your previous year numbers to the tax return and posting actual expenses for the current year. . .it IS absolutely necessary. . what other option is there?

These are my thoughts. . .

Hope you find them helpful,

Laura Dion
Certified QuickBooks ProAdvisor?
Cents-able Bookkeeping

Employees purchased items and were reimbursed on their paychecks, catagory reimbursed expenses.

This seems to be contradictory. The way it reads above, it looks like the employees are being paid to take stuff home.If the employees purchased items that were paid from payroll dedcution, they would not be reimbursed on their paycheques, they would be subject to a payroll deduction instead.
Is it possible that theywere indeed deductions and that the title "reimbursed expenses" is not correct?

Plus65 makes a good point. . .(if I misread your post)

Please clarify: Are the employees buying supplies for the business and being reimbursed for those? (that is what I had thought you were saying. . .)

If so, be sure that the "reimbursed expenses" item hits an expense account. . .

Whatever is happening, you need to be sure that it is being tracked correctly going forward as well. . .

Laura Dion
Certified QuickBooks ProAdvisor?
Cents-able Bookkeeping

Thank you both for responding.

Let me clarify my original posting.

The employees would stop and purchase items for the business, then the company would reimburse those expendatures on the employees paycheck. This posting to an account named reimbursed employee expenditures.

There is no tie-in from the reimbursement to the employee to the correct expense account (i.e. office supplies, or shop expense). Therefore, the bookkeeper proceeded to posting the purchase ticket into petty cash as an expense (i.e. office expense, shop expense, etc).

There are over a years worth of postings conducted this way. Yes, a journal entry will need to be made, but I was just hoping that someone had run into such a situation and might have a recommendation on how to address this issue.

I don't believe this is going to be a simple solve, it will some way have to be done through the accounts.

The other answer to the question posed, is no the trial balance is way out, that is why we are working on the books to try to get down to what has caused the out-of-balance postings, and this is only the tip of the iceburg.

Thank you for your responses.

Ilona Culp

Maybe I am missing something here, but most of 'us' have taken over books that are out of whack due to mis-postings.

You know that the expenses were booked twice. . .what you need to do it to total the amount of postings to Petty Cash that was paid and expensed on checks to the employees.

I would run a general ledger detail report by the reimbursed employee expense account and the general ledger account (Set the date for each fiscal year, or whatever date range makes sense to you). I would export that report to excel. . .sort by amount and click off all those that match (If you aren't that proficient with exporting and manipulating Excel data, just use a highlighter, matching the numbers from both accounts) The total of these will give you the amount for your journal entry, debiting petty cash and crediting reimbursed employee expenses.

Another thought. . .if you make your adjusting entries to your CPA's trial balance, this might take care of everything you need anyway. . .is it worth the effort to tweak the history???? Oftentimes, I find, it is not. . .but this is the client's decision to make. . .

For the current fiscal year, you have to make an adjustment. . .In the future, offset the actual expense accounts when paying the employee. . .this will make your life easier!!

Hope this is helpful,

Laura,

Thank you very much. I will discuss this with the client. He was hoping to actually find out what his expenses were so that the tax return would be more accurate. But that can be done by verifying the account before making the journal entries.

This sounds like the fastest way, since the CPA is trying to get the 2005 tax return done, and then she is probably looking at sending in an amended 2004 return.

Again, thank you for the input.

Ilona Culp

As I now read the situation, Employees were reimbursed for business expenses but the amounts were not debited to the appropriate expense accounts; they were debited to an account called "reimbursed employee expenditures"?

Then the same expenses were posted to the proper expense accounts but credited to the Petty Cash account instead of the reimbursed employee expenditures account.

IE:
Credit Bank
Debit reimbursed employee expenditures

Debit appropriate expense account
Credit petty cash account.

It would appear to me that the expenses have been recorded correctly except if the reimbursed employee expenditures account was classed as an expense account. (It appears that it was)
In either case, the correction is simply to:
Debit Petty cash for the amount of reimbursed employee expenditures for the appropriate period
Credit reimbursed employee expenditures for the same amount.
The posting initially done through the petty cash account will have distributed the expenses correctly so there is no need to try to determine that distribution.

Do this for each period involved and, barring other bookkeeping anomalies, the records should be correct.

Plus65:

Am I confused, or isn't that what I wrote?

"The total of these will give you the amount for your journal entry, debiting petty cash and crediting reimbursed employee expenses."

Maybe your explanation will make more sense to IlonaCulp. . .

My suggestion to match the transactions was because I don't assume that ALL of the postings were double posted. . .in fact, I would be surprised if they were. . .

Anyway, this forum is a great way for us to learn from one another. . .eh?

You apparently have the expenses deducted twice. Once as employee reimbursements, and again when it was detailed in petty cash.

The simple way to fix this:

dr. petty cash
cr. reimbursed expenses

When you go forward, you will have the reimbursed expenses from the p/r. After the p/r is complete, then itemize the expenses.

dr. expenses(detail)
cr. reimbursed expenses

The reimbursed expenses is like a transition (or intermediary) acct. After each p/r it should =$0.

Blrgcpa63:

Am I confused, or isn't that what I wrote?

"The total of these will give you the amount for your journal entry, debiting petty cash and crediting reimbursed employee expenses."

Maybe your explanation will make more sense to IlonaCulp. . .

I am curious. . .why would you not just offset the actual expense accounts when paying the employee instead of using the reimbursed expense wash account?

Thank you all for your responses!

I totally agree, this forum is wonderfull for pulling all our talents into one area to help each other.

You are all basically saying the same thing, so I know how to proceed with the corrections, and how to direct the current bookkeeper on the correct posting. Further, I will help her set-up her accounts so she does not have to double post in order to get the expenses posted to the correct expense accounts. This will alleviate any further postings from this point forward.

Once again, thank you all very much.

Ilona Culp

I just tried to expand on your explanation and how to proceed in the future.

When reimbursing by p/r check, there is usually a limited space and you have to explain every item to the employee.

Reimbursed expense is satisfactory for that purpose. The employee should know how much he is owed.

As detailed, however, it is not a good enough explanation for the general ledger.

Reimbursement can be made by a separate check. It does not have to be included on the p/r check. People do it for convenience. I prefer to keep the p/r and expenses separate.

I thought I might be missing something as most of my clients use an outside payroll service. . .

Thank you for clarifying. . .