Expense Claim Guide

I can not seem to find Expense Claims in the Guide? Does anyone know where I can locate it at?

I am trying to figure out how I would track business expenses I pay for out of my personal funds and then how I would reimburse that back to me.

There isn’t currently a good Guide. But expense claims are simple. They are useful for two things (that I know of):

  1. Company expenses paid from personal funds (as in your case).
  2. Deductible expenses where no money actually changes hands, such as automobile mileage allowances and per diem.

First, of course, enable the Expense Claims tab under Customize. When you have an appropriate expense, click on the tab, then on the New Expense Claim button. Fill in the entry screen much like you were spending money from a cash account. You can allocate the claim to any expense account, billable expenses, etc.

The only thing that is really different is that the person who paid the expense or incurred the allowance must already exist as an expense claim payer. Capital account owners are automatically on the list. Employees are, too. But if you are a sole owner and don’t use a capital account, you must create yourself as a payer under Settings.

When you enter a claim, that creates a liability, because the company owes that person for their payment of a company expense. You can reimburse the payer from a cash/bank account. Or in the case of owners, you can clear the liability to an appropriate equity account via a journal entry. An expense claim is equivalent to a contribution of capital, so you debit the Expense claims account and credit the equity account. Expense claims is a control account, so you also have to indicate the correct payer subaccount when allocating a transaction there.

How often you clear Expense claims is up to you. Monthly works well for me. And I think it’s good practice to clear it at the end of an accounting period just so the reports are less cluttered. But you can do it every time there is a claim, if you want.

Special note: if your business is a registered company (PLC, LTD) and you are not paying the Expense Claim via Spend Money, then your Journal must transfer to a BS - Liabilities - Shareholders Loan account and not Equity - Capital. For registered companies, Equity - Capital is reserved only for the value of any issued shares (stock holdings)

@Brucanna is right. When I mentioned owners, I was referring to sole owners or partners, not shareholders.

Okay forgive me but I’m a little confused. If I pay for something out of personal funds for the business and don’t want to be reimbursed as the own but have it allocated to funds contributed do I have to enter an expense claim as well as a journal entry? I ask because in journal entry I can use one line for the expense to the business under the correct account as a debit and use another line to enter it as a capital account contribution of funds as a credit. So is there a need to enter an expense claim at all?

If you enter the transaction as you describe:

Dr: Expense account (call it Office equipment, it doesn’t matter for this example)
Cr: Capital accounts: Member: Contributions

the end result will be the same as if you used an expense claim, but there is no record of the actual transaction by which the office equipment was purchased. Accountants and auditors might not like that. The accounting trail looks like the member contributed capital, but there is no matching receipt in any cash account. And it looks like the company bought office equipment without spending any money. Granted, you could write up a memo, attach receipts, make explanations, etc. It would be perfectly legal and technically sound accounting. However…

If you use an expense claim, with the Payer as the Member, you have recorded that the member bought something on behalf of the company and got a credit to his/her capital account. That’s a little cleaner audit trail.

As long as you choose the member from the Members group of expense claims payers, you won’t end up with anything in liabilities. If you define the member separately as an Expense Claim Payer, then the transaction is credited to Expense claims and you need to either reimburse or make a journal entry to clear it.

So, you make the choice. The fact you recognized the equivalence here means you are gaining understanding of double-entry accounting. :slight_smile: How exactly you decide to do it will depend on whether you think you’ll ever buy things for the company from personal funds in the future. If not, don’t clutter the program with the Expense Claims tab. But I’d bet you will have expense claims frequently as an owner: unexpected dinner with clients, automobile mileage, etc.