Good day!
Please advise on how to record the transaction in the following scenario:
A company prepaid $10,000 for a 10-day stay at the hotel for its employee. The employee moved out earlier than expected and half of the amount was refunded to the company.
How should the amount refunded be categorized in Manager since it’s not the company’s revenue? Thank you.
Is the company recorded as a customer?
How did you record the prepayment?
How did you record the cost of the stay?
Show the edit screen for all the transactions - you can edit out any personal or confidential details
The prepayment isn’t strictly revenue either but a prepayment
The company is not recorded as a customer (the hotel isn’t recorded as anything either, just a one-time expense if that’s what you’re asking).
The prepayment was recorded as a business expense (screenshot attached).
The cost of stay is assumed to be the difference between the amount prepaid and the amount refunded.
The refund went into the suspense account (screenshot attached) for further categorization.
If there is no simple way of recording this should I just delete the prepayment transaction and record the difference? I just wanted to keep books reflective of actual transactions. Thanks again for the help.
Record the receipt of the refund to the Business expenses account. This will reduce the expense to the actual amount paid and will not show as income.
Posting the refund to the same account, Business expenses, as the original payment is the simplest option
But this is not the best way to account for the expense - you have charged the period ending 31.12.2021 with an expanse of 20k AED but the actual cost was not that amount and may not have occured in that period at all. You have not said when the actual stay was.
By recording the refund on 4.1.2022, you have possibly moved a cost from one accounting period to another which will lead to overstating the profit in one or other of the periods.
Whether this is material or not, I can’t tell but it certainly isn’t the best practise
Indeed; I had missed the dates. @Riyad, this could also mean your payment on 31.12 should be recorded to an asset account, which would change your subsequent accounting for the refund.
Part of the expense could be in 2021 and part in 2022
A lot would depend on whether the 20K, or 10K, were only a tiny part of the company costs or a major part. If the total expenses in the year were in millions, 10K isn’t really material
@Riyad, this entire thread is confusing, because you never said whose accounts are being discussed. Is it the hotel or the business whose employee stayed there.
Also, every transaction you have shown will end up in Suspense, because you have not selected cash or bank accounts, payees, etc.
I apologize for making things more confusing than they needed to be. I blurred out certain details - they aren’t missing. The question was about the business that’s paying the hotel and receiving the refund from the hotel (as shown on the screenshots above).
All transactions occurred within the same year but it’s convenient that I now know what to do should this happen in two separate accounting periods.
The problem has been solved and I appreciate all the help. The refund should have gone into the same account (Business expenses). Thank you.
The dates on the transactions (28/12/2021 and 4/1/2022) are for different years
So your comment is wrong or the dates are wrong
The dates are the dates of the cash or bank receipts and payments - the dates the expenses were incurred are a different thing altogether and are not related to the date of the payment or receipt
This is a very confused set of accounts - if an auditor looked into it with a sceptical eye, they would be asking a lot of questions
In my opinion simply make “Receipt” against the “payment” to Hotel.
For example: You created Payment Voucher of 10,000/- and 5,000/- returned by the Hotel So just simple create Receipt Voucher of 5,000/-
cancelled by user
How important is the length of stay in this situation?
Both the prepayment and the refund occurred within the same year (messed up the dates in the app) but I’m interested in learning how to record the refund if it had been returned in the next accounting period than the prepayment? In that case, I cannot simply record it into the Business expenses account to reduce the original amount paid.
The amount (20k) is not a major part of the company’s costs.
If the stay extended over a financial year boundary, it is incorrect to book the cost to one of the years.
It should be split between the two.
For example, you could record the whole amount in the first year and then enter a journal entry with a credit to the expense account and a debit to a prepayment account to carry part of the cost into the new year.
Or you could accrue part of the expense in the first year and only enter the invoice when the stay is over
Or …
There are many ways to do this - but this is a question for your accountant as it has nothing to do with the functioning of Manager
