I need to know how to enter mileage expenses not paid but accepted for tax purposes. I have entered them as expense claims and then reconciled with journal entries. Is there a better method? When I run a receipts and payments report, expense claims show up under receipts when they are really an expense. I appreciate help, please. Thank You!
You are correct to use expense claims. A deductible allowance is equivalent to the expense claim payer having paid for something on the company’s behalf. In that sense, it is no different than an employee or owner buying copy paper at the office supply store. The expense claim should be posted to an appropriate expense account, like Motor vehicle expenses, or to Billable expenses if it will be passed through to a customer.
This could the correct approach, depending on your legal form of organization and equity structure in your chart of accounts. Make sure you read the Guide: https://www.manager.io/guides/6898. If you are a sole proprietor and using an Owner’s equity account rather than a capital account, your method is correct. If you have a capital account and have entered the expense claim correctly, the allowance will go directly to your capital account as explained in the Guide. If the claim is by an employee, it will post to Employee clearing account and must be reimbursed by a payment.
If this happens, you are doing something wrong. Post screen shots of (1) the Edit screen for an expense claim and (2) the receipts and payments report (whatever you are referring to, as there is nothing by that name in the program). The only time an expense claim would have any connection with the Receipts & Payments tab is if you reimburse someone directly for the claim. But that should not be done if you are clearing the Expense claims liability account with a journal entry, paying an employee, or allowing the claim to post to a capital account.
I guess it is worth noting that the journal entry I mentioned as being an acceptable approach for a sole proprietor would debit Expense claims and credit Owner’s equity.
Thank you for getting back to me so quickly.
Here is a screen capture of the report I ran and one of the expense files. My question is why the expense claims is showing up under receipts.
There are several things to discuss, @paula.
First, you’ve apparently defined an expense claims payer that is a (probably your) business. That’s not how it should work. The expense claims payer should be a person, such as yourself. Someone has incurred an expense on behalf of the business. The business claims the deductible expense by virtue of its being posted to the Vehicle expenses account. The easiest way to fix this and other expense claims is to edit the expense claims payer under Settings. Change that name to your name (assuming you are the one incurring these expenses) and all prior expense claims from that payer will automatically be corrected.
Second, the Receipts & Payments Summary is kind of a funny report. It replaced a prior report that was called Cash Flow Summary. Many people complained because the Cash Flow Summary wasn’t really a full-up statement of cash flows like many accountants prepare. Regardless, the purpose of the report is to summarize inflows and outflows to various accounts. The terminology is confusing, I think, because account inflow and outflows may not actually involve receipts and payments. But in that context, an expense claim is like a receipt, because the expense the payer incurs on the business’ behalf is like a contribution to working capital from that payer. So the expense claim increases the balance of the Expense claims liability account. (If the payer were a capital account owner, it would increase the Capital accounts equity account. Either way, it represents money the business owes to someone.) At the same time, the expense claim increases the balance of whatever expense account it is posted to, in this case, Vehicle expenses. Drill down on that balance and you will find it. (Double-entry accounting at work!)
So it is incorrect to think of the Receipts & Payments Summary as a list of transactions, and especially as a list of receipts and payments. More logical places to see expense claims are:
- In the listing of the Expense Claims tab
- By drilling down on Expense claims balance on the Summary page
- In the Expense Claims Summary under the Reports tab
The bottom line (subject to confirmation of how your chart of accounts is structured and your form of organization) is that you seem to be doing things correctly.
One tip I can offer: it is helpful in various reports if you put something in the
Payee field on the expense claim. Personally, I enter Allowance for mileage and per diem. If actual money has changed hands, I enter the merchant’s name.
Thanks for all your help!
The IRS found errors on my tax forms and now I’m troubleshooting. What report will show both what I received and what I paid out? I tried looking in payments and receipts and filtered by year. The receivables amount balanced with my checkbook and bank statement but payables did not even though the numbers match. I don’t understand what’s happening. Is there something I’m missing?
I appreciate any help you can give!
These will be listed in the General Ledger Transactions report, sorted according to the accounts transactions were posted to. Every transaction will appear twice, once for the debit and once for the corresponding credit. (Or, if there were multiple line items, one or the other might be broken up into additional entries.)
I don’t know what you mean by this. Receivables and payables in accounting refer to amounts owed to you by customers and amounts owed by you to suppliers, not amounts you have received or paid. I suspect you are referring to the latter two. Please confirm.
Understand that vehicle mileage allowances will not show as receipts or payments, because no money changed hands. They will be reflected in the Vehicle Expenses, Expense claims, and Owner’s equity accounts (or whatever you are calling your equity account). You will never match them with anything in your bank statement or checkbook. But not everything in that report will be a receipt or payment. You can also drill down on your cash and/or bank account balances to see their histories in Cash Accounts and Bank Accounts tabs.
The key to resolving your problem with the IRS should be contained in whatever letter or notification they provided. What did they say was wrong? And to simplify this discussion, please answer the following questions:
- What is your legal form of organization?
- Are you using a capital account?
- Who is the expense claims payer involved?
- What category is the expense claims payer in on the dropdown
Payermenu when you enter an expense claim?