How do we treat reimbursable expenses that are part of the cost of an asset to be sold later?

We are in the process of building an asset for our customer.  While building the asset, our customer has agreed to reimburse us certain expenses.

However, we need to reflect these expenses as part of the asset cost.

Example:

Vendor send us a bill that we pay for. That expense is part of the value of the asset.  We will add this to the value of our asset and sell it to our customer later.

We invoice out customer who reimburses us that expense. 

How do we record all transactions? What is the "income" from the customer for?

Answer

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You should have a current asset account for work in progress (WIP)

you post all costs to make the project to that asset account

if the customer pays you for an expense after you have already paid it, then deposit the funds and use that same WIP account as the source account for the deposit.



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