Normally, when I create an invoice, I will select “Sales” in the account column. This is OK most of the time (in accounting language, it is Dr. Accounts receivable and Cr. Sales), but consider this situation:
I paid for something on behalf of my customer, say USD50 for a bus ticket for the customer. I want to create an invoice get the reimbursement from the customer. This means an account entry as follows:
Dr. Accounts receivable USD50
Cr. Cash in bank USD50 (instead of Sales USD50, because this is not my sales income, this is merely a payment for the customer)
But in Manager it seems I can only choose from the income/expense accounts when creating an invoice, Cash in bank is a balance sheet account that is not available in the drop-down list.
I would say the best option would be to record the expense (the bus ticket, in your example) as a billable expense against that customer, and then invoice for it. That way the sales invoice will record as income, but it will be offset by the expense.
If the expense is not something that you can record (for example, if you can’t get a valid invoice for it), then it sounds like this is an out-of-business arrangement that you need to settle with the customer in a personal capacity off the business books.
Create an account in the Liability side of your Balance Sheet called “Advances From” / Record the USD50 for the Bus Ticket by Debit Advances From and Credit Cash in Bank. When your client gives you the USD50 back just reverse the transaction / Debit Cash in Bank and Credit Advances From. This way you can use the Advances From to track money owed by your client (negative amounts), outside of the normal Sales transactions. Simply issue him with a Statement of Account when requesting the USD50 to be paid back.
I think you need to ask yourself if you really have to issue the customer with a sales invoice.
If the answer is yes, then I think there is no way to avoid it being recorded as income. The solution would be to record your outlay as an expense. Billable expenses is an elegant way to do this, but you don’t have to use them.
If the answer is no, then you could follow @stec1921’s suggestion. Alternatively you could record your outlay against the customer’s Accounts receivable, which avoids the need to create a new liability account.
Billable expenses are expenses incurred on behalf of a customer. They do not initially appear on your Profit and Loss Statement, because they are not expenses of your business. Instead, they will reside temporarily as assets on your Balance Sheet and be passed through to the customer by invoicing.
From the guides linked to in my earlier post you need to:
Note
You have two options when taxes apply to recording of billable expenses:
(1) If a tax is nonrecoverable , such as a sales tax, include it in the unit price of the billable expense and do not apply a tax code . The tax will be passed directly to the customer for reimbursement and will not affect your tax liability. You (and your customer) will lose separate visibility of the tax. However, that will not matter, because neither of you can claim the tax to offset tax liabilities. The tax is effectively part of the price of whatever was purchased.
(2) If a tax is recoverable , such as a value-added tax, apply the tax code to the line item. The unit price can be either tax-exclusive or tax-inclusive, but, when tax-inclusive, you must check the box indicating Amounts are tax-inclusive . In either case, only the tax-exclusive billable expense will be passed to the customer. The tax amount will be posted to your own tax liability account, where it will offset taxes payable to the tax authority.
Why not just make Payment to the Customer Account Receivable if you dont want to go through billable expense route.
By default its going to be shown as Refund on Customer Statement but you can change it by checking the Custom title box at the end such as billable exp etc.
A lot will depend on the service agreement you have with your client and how it is worded, in the eye’s of the government (tax office). Taxation law is very complicated and way above my pay grade. My suggestion is to keep things simple for the USD50 you paid on behalf of your client, just treat it as an advance and let him deal with the input tax from his side. However if your service agreement includes for the treatment of billable expenses then I would follow the agreement.
