@jon raises an issue about accepted accounting practices that really has never been resolved in the 15 years or so since the FASB guidance he cited was published. Sadly, the guidance document itself is nearly incomprehensible unless you are a CPA. Regardless, I think @Jon has slightly mischaracterized the real underlying choices. Here is my view:
Two schools of thought are commonly followed on reimbursed expenses. One is that reimbursements are a form of revenue. The other is that reimbursements are reversals of expenses originally recorded to expense accounts.
The first viewpoint is the one covered by the FASB guidance. It is widely (and fairly) criticized for overstating revenues, making the company appear larger and more active than it really is, especially for services organizations with lots of pass-through expenses, such as travel. The important thing about this approach is that the reimbursed expenses account is an income account, not an expense account. It is credited and revenue is recognized when a sales invoice is created, just like any other sales account, while accounts receivable is debited. So, contrary to what @Jon suggested, the billable expenses never touch a standard expense account. A side point is that this approach is really only consistent with accrual basis accounting. So it won’t work very well for small, cash-basis companies.
(Interestingly, the FASB guidance was based on two key considerations. One was that reimbursed expenses are very much like shipping and handling costs, which are revenue. That finding itself is fairly ridiculous on its face, since a company does something to earn shipping and handling fees–its ships and handles, while it does nothing to earn the so-called revenue of reimbursed expenses. The second argument was that the company bears credit risk, since the expense is incurred before reimbursement. Yet that risk is generally very slight, because the customer will first have agreed to reimburse expenses and, most commonly, no profit is made because reimbursement is at cost.)
The second viewpoint results in recording of the net of expenses and reimbursements. This can be implemented in several ways. One is to use standard expense accounts, with contra entries, but this is not very clean. Another is to use special expense accounts, so the standard expense accounts pertain only to direct company business, not expenses on behalf of a customer.
A third way–the one Manager uses–is to treat billable expenses like work in progress and record them in a temporary asset account. The billable expenses asset account is cleared to accounts receivable by invoicing. No income or expense accounts are involved unless markups are added to the expenses, which go the a dedicated income account.
All of these approaches produce the same bottom-line results. The question is which produces the most representative picture of company position and performance. As @Brucanna said, the revenue approach of FASB is appropriate for large, publicly traded companies. But I think it does not present a valid picture of operations for a small company, whether a sole trader or a small corporation.
Just as I was ready to post this response, @lubos posted his response. He has said basically the same things in a more succinct fashion. The bottom line is that Manager’s approach seem most appropriate for the target audience of the software: small companies.