Reimbursement for Inventory Items

1) Setup bank account called "Clearing Account". 2) Invoice a miscellaneous customer for the inventory items sold (this adjusts your inventory count. 3) Use "Pay Bills" and using the "Clearing Account" as your bank account record a payment on the invoice to clear it out. 4) "Write Cheque" payable to the social chair allocating the expenses she paid for the social event minus the amount you recorded in "Clearing Account" for the inventory sold.

Cat

Bill Bickner wrote:

Sounds good. Thank you so much - I've spent a lot of time agonizing over this.

What sounds good may not be in fact. In this situation is not the best solution. Whats up with the added complexity of adding another bank account? KISS is the word of the day.

>

The Allan Martin Black Belt Way:

1. Create a Sales Receipt for the item(s) sold to a Miscellaneous Customer. Post the cash received to an exchange account or Due from Social Chair, or what ever.
2. Write check to social chair for the expenses and enter a negative amount coded to the account above for the cash received in step 1.

I found having a "Clearing Account" handles a lot of difficult problems such as: "Zero-dollar" cheques, contra accounting, or cases such as this. I feel it is the simplest and the cleanest way to handle transactions when one doesn't want to clutter up the bank account or wants a way to track what has happened.

Alan, your way is an option but then you are creating a vendor name for the social chair and that will sit on the vendor list because there will be a transaction attached to it. Instead of creating an invoice for it the poster could use a Sales Reciept (i.e. cash sale) and "deposit" the monies into the Clearing Account then "Write Cheque" to clear the amount out (i.e. debit the expenses for the social event and credit the clearing account for the monies received).

Cat

Allan Mart> > 1) Setup bank account called "Clearing Account".

In this specific case there is no reason to set up another "Bank Account". A simple current asset account called "Due from Social Chair" or "Exchange" does just fine. In addition, if this type of transaction does not clear out before the end of a reporting period the balance would show up as cash on a balance sheet if your method is used. Clearly misleading to the reader of the financial statements.

It is reasonable to asssume that the Social Chair is already set up as a vendor. Why wouldn't you want to keep track of disbursements to the Social Chair? True the name will sit on the list but as long as you don't have to feed it, this should not pose any sort of problem.

Instead of creating an invoice

I guess doing accounting for over 30 years has taught me that simple is best and this system has worked for me. Bill posted looking for advice

- I and you gave him our personal opinions of how to deal with the problem. Neither option is the right or wrong answer - just opinions he can choose to accept or not.

Have a great day and I hope the weather is better in your neck of the woods than up here at the coast in BC.

Cat

Allan Mart> >I found having a "Clearing Account" handles a lot of difficult problems

The first thing I learned from my mentors while working in mid-sized CPA firms over 30 years ago was when asked why I did something a particualr way. The answer "Because It was done that way last year", is the wrong answer.

I would say that smugness is also wrong. I have always tried to be polite, considerate and understanding in any of my postings. Too bad it's not reciprocated.

Cat

Allan Mart> >I guess doing accounting for over 30 years has taught me that simple is

That is not the way I choose to conduct myself. After all I eat worms and like it.