DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Use Accounts Receivable to track what one company owes me?


#1

I pay from my personal bank accounts for various company expenditures. Then my company reimburses me.
I was thinking maybe I would activate the Customers tab which would give me Accounts Receivable.

The reimbursement is most often not a transfer of cash from my company to me. The reimbursement is accounting entries in my books and my company’s books. The effect is to transfer various expenses paid (employee training, licenses and permits, repairs, advertising, supplies, etc.) from my books to my company’s books. So then my company has the expense.

The other half of the transfer increases the amount my company owes me (credit an owed-to-president or credit a receivable-from-president) account. On my books the other half of the transfer decreases the amount-my-company-owes-me (debit a company owes me account or debit an I owe the company account.

I restate the in terms of my company’s books. In the reimbursement, my company debits various expenses and credits payable-to-president (a liability to my company) or credits receivable-from-president (an asset to my company).

I restate in terms of my personal books. I am debiting various expenses paid accounts (these expenses being an asset to me because my company will reimburse). I credit a company-owes-me account (an asset to me) or credit an I-owe-the-company account (a liability to me).

I am thinking that Accounts Receivable might be a way to go. Each “customer” on my books corresponds to an expense account on my company’s books. It is a one-to-one correspondence.

Do you think I would run into trouble using Customer Accounts Receivable in this way? Or would you recommend using Special Accounts? Or, do you have some other ways for me to consider?


#2

That’s so wrong in any number of ways - Accounts Receivables is for customers the companies sells goods or services to and who pay later

You need to look into using Drawings but read the guides first


#3

Use expense claims for business expenses paid with personal funds. Read the Guide.


#4

I re-read my post. I think I was very unclear whether I wanted to do something to my personal books or to my company’s books. I think that cloudiness would naturally confuse Tut and Joe91.

I’m trying to figure out what to do to my books. So I think I do have an Accounts Receivable with customer being billable for expenditures I make on behalf of my company.

Looks like “Record Billable Expenses” is close to what I want to do. Say that I transfer the expenses at the end of a quarter. During that quarter I might have 12 purchases of fuel (Automobile Expense), 3 monthly payrolls (Payroll Taxes), and a other expenditures I made on behalf of my company.

The Billable Expenses gives me a nice total of the expenses I am transferring to my company (or billing my company). But Won’t Automobile expenses appear many times instead of just the total Automobile expenses for the 3 months? When I enter the transactions into my company’s books, I just want to enter totals. I will need to keep the Automobile expenses separate from Payroll Taxes and both separate from Employee training. For actual Payroll I use Payslips in my company’s books, but I am paying from my personal books.

Maybe I have each customer be a reimbursable expense, one customer for Automobile expenses, another customer for payroll expenses?

Or maybe I do it all in the chart of accounts. Have a group account for reimbursable under Assets, and the various expense categories as accounts under reimbursable?

Or maybe I make a Special Accounts control in Assets. Then I make a special account for each expense category. I don’t use Customers and don’t use Billable. I just use Special Accounts?

Seems like there is more than one way that I can get what I want from Manager Accounting because Manager Accounting is very flexible. The question is what is likely to be simpler and easier, especially in the longer run?


#5

I’m more confused than ever.


#6

Me too!

@Indinfer

I would suggest keeping your personal and business affairs separate by having a business bank account and paying business expenses from that account.


#7

@Indinfer, let’s get one thing straight. You should absolutely not consider any category of expenses to be customers, no matter who pays for them or what funds are used. Customers are subsidiary ledgers of Accounts receivable and are used to record transactions in which you sell something to another entity with the expectation of receiving money from them at some future time; in other words, customers are people or companies to whom your business sells on credit. (That future time could be right away or months from the sale.)

Expense accounts are for recording different categories of expenditures, such as your automobile costs, wage expenses, and so forth.

Billable expenses are for things your business purchases on behalf of a customer, not for your own use. Examples include travel costs to perform tasks on a contract or materials for repairing the customer’s property. Billable expenses will only reside on your books temporarily. Ultimately, they will be passed through to your customer.

Expense claims are used to record business expenses paid for from your own funds.

Let’s take the various things you have mentioned one at a time:

Every time you do this, record it on an expense claim. You can have as many individual purchases on a claim as you want. The point is, the funds for the purchase did not come out of a business cash or bank account. The expenses can be for operational costs of your business (wages, office rent, automobile) or they can be billable expenses that will be passed through to the customer. Make sure you thoroughly understand the Guide: https://www.manager.io/guides/6898, including the various options for clearing the expense claims.

Billable expenses are entered as normal purchase invoices, payments, or expense claims. But instead of selecting the expense account that might normally be appropriate, post the transaction to Billable expenses and the customer’s sub account. See https://www.manager.io/guides/5503. Billable expenses are cleared by invoicing from the Customers tab. See https://www.manager.io/guides/9652.

What you are describing here is normal equity accounting. Depending on your legal form of organization, you can do this with an Owner’s equity or capital account. See https://www.manager.io/guides/6971 and https://www.manager.io/guides/8936. The other accounts you mention may—I repeat, may—accomplish the same thing, but sacrifice the advantages of built-in features and reports.

Absolutely not. See above. In the case of your personal accounts, only your business might be a customer, not the expense accounts within the business.

Definitely, because the way Accounts receivable is reduced is by receiving money from outside the accounting entity. If you are not actually receiving reimbursement personally from your business, you are not receiving money. The fact is, the personal asset of money owed you by your company is already accounted for by your equity account (of whatever form) in the business.

This can be true, but only after your business has invoiced the customer for the billable expenses. Until then, your business has an asset in the Billable expenses account. If the billable expenses were originally paid with personal funds, it will also have a liability in the Expense claims account.

Based on what you have written, special accounts have no place in this, for either your personal accounts or your business.

From the perspective of your business, expense claims are a very simple way of recording company expenses paid with personal funds. They are also a great way of accounting for allowances, such as when you record automobile expenses based on government-approved mileage rates. No money actually changes hands, but the expense is deductible for income tax purposes. Claiming the allowance on an expense claim is equivalent to contributing additional capital to the business. The claim is cleared with a journal entry to your equity account.

From the perspective of your personal accounts, my own opinion is that all this is probably wasted effort. Personal expenditures on behalf of your company are already adequately recorded via expense claims. You were quite confusing on the issue of whether your expense claims sometimes cover items purchased for outside customers or are just for the “customer” represented to your personal accounts by your business. But either way, expense claims in your business accounts still work.

The prospect of ever having balanced personal accounts in a double-entry accounting system like Manager is unlikely. It is also generally unnecessary, because most things you buy for personal use are not deductible for tax purposes. So it isn’t clear why you are keeping these personal accounts at all.


#8

I expressed what I wanted in very unclear ways. Even so, Tut, I am grateful that you understood exactly what I want: To leverage Manager’s built-in features and reports.

Sometimes due to my lack of knowledge, and other times due to some prior knowledge (such as a course, seminar, or another accounting system) I have difficulty with any guide, no matter how well written. I find the Manager guides helpful. The guides now seem to practically teach Accounting 101, and more. Still, I reckon no matter how simple and thorough you write the Manager guides, you cannot anticipate how a person’s prior knowledge will hinder his/her understanding.

I’m glad you are helping me overcome my prior knowledge and lack of knowledge barriers. Thank you very much.

That is what I did not get. I went back to the Guides and my experimental Manager books and now see how I can do this.

Looks like I enter all the separate expense claims. I can have several items on one claim. For what I am doing, I should only have one kind of expense on a claim. For example, I could have multiple Payroll Expenses on one claim. And I could have multiple claims for a Payroll Expense, such as October’s Payroll Expense, November’s Payroll Expense. However, I should not mix expense categories in one claim, such as Automobile Fuel Expense and Payroll Expense on one claim.

Then, when I go to Customers tab, I open my company (listed as a customer). I check all the Payroll expense claims to issue one invoice. Then I check all the Automobile fuel expense claims to issue another invoice. I do this for each expense category I am transferring from personal books to the corporation’s books.

I still have one question. Since I issued sales invoices, I presume I need to do a receive payment on my personal books. And I presume I can run reports to show invoices unpaid (i.e. expenses that I have not yet transferred to my corporation). But I am not seeing any of this.

I went to Receipts and Payments and entered a receipt. Whether I specify the invoice or not, I don’t see invoices designated as paid when I go to the Sales Invoice tab.

Is the answer to my question: I’m done when I issued the invoices? Or can you figure (as you have done so many times in the past) where I might be tripping up?


#9

There is no reason whatsoever to limit an expense claim to a single type of expense. Every line item on the claim will be posted to the appropriate expense account. You could put an entire year’s worth on the same expense claim if you wanted. But let me emphasize an important point. Expense claims are record on the books of your business, not on your personal books. They are claims against the business for expenses paid with personal funds.

This paragraph reinforces my impression you might be entering expense claims in your personal books and somehow be trying to transfer them to your business books. See my comment above.

Regardless of what you are doing, though, there would be no reason for separating anything by category. No matter what kind of transaction you are entering, in personal or business accounts, you can combine as many line line items as you want. Separation is completely pointless.

Yes and yes. But as I’ve said before, it all seems totally pointless. The act of issuing your business an invoice from yourself means you are treating yourself as another business. Why?

Then you are doing something besides what you have described. If you enter a receipt and post it against Accounts receivable > Customer > Invoice #, it will result in that sales invoice showing as paid in the Sales Invoices tab (assuming the receipt covers the full amount of the invoice). But for the umpteenth time, doing this seems pointless.

No. That only creates the receivable. You need to record a receipt (allocated to some cash or bank account) when money comes in for the invoice. But, based on some of what you’ve written, it doesn’t sound like your business is actually paying you anything. That’s another aspect of the general wrongness of what you’ve described.

@itmoto had it right. You need a separate bank account for your business, especially since it seems to be a corporation.


#10

You are right that a separate bank account would simplify.

But maybe my understanding continues to improve. I think you are telling me to stop what I was doing on my personal books, and instead, do it on the the corporation’s books.

What I was doing on my personal books was categorizing the corporation’s expenses. That meant that I had to replicate all the corporation book’s expense accounts on my personal accounts. So finally, I see this is unnecessarily error prone and more than twice the effort. It is error prone because of the extra risk of having an extra or missing corporate expense account on my personal books. And I have to categorize each expense twice, once on my personal books and again when I transfer the expenses to the corporate books. Should be the same category on personal and business books; means I have so much to keep straight in every transfer of expenses. And if I later start accounting for a second company, all the work, error risk, and actual errors has got to multiply geometrically. What a mess I was headed for.

Maybe I’m in a store and decide to buy something that is a corporate and not a personal expense, such as printer paper which is going to be used for business printing. But I don’t have my corporate check book with me. So, I charge it to my personal credit card.

On my personal books, I credit my credit card for the purchase amount. Now I need to debit something. So, I will have one account to which I always debit this kind of purchase. It would be My-business Reimbursable, an Asset account.

At the same time that I enter into my personal books, I think you are saying I should enter an expense claim transaction in my business books. Now I think I see. Just because I entered an expense claim in my business books does not mean my business has reimbursed me yet. The actual reimbursement is a separate transaction. The business expenses from the expense claim will show up in my-business reports.

The total un-reimbursed expenses in my-business must always equal the reimbursable expenses in my personal books.

If I have this much correct, then I see you have already saved me a ton of duplicate and unnecessary work and saved me a lot of searching to correct errors. I just have to do all the expense categorizing of my business books in my business books, and not in my personal books.

I made some test transactions. This time I am finding all my numbers where I expect in the balance sheet, profit and loss, and expense claims summary.

Thank you, Tut. I am grateful you worked through all this with me.

Of course, I am interested if you have any more advice for me. Right now, looks to me like I am setting up next year’s books to better leverage what Manager Accounting is built to do for me. And looks like next year’s accounting is going to be a whole lot easier.


#11

You don’t need to set up books for next year. Manager is a perpetual system. Read the Guide about closing accounting periods.


#12

I remember from when you explained it to me the first time. I already use Manager as a perpetual system.

But what I am doing is analogous to changing from one accounting software to another accounting software. Just that I am changing from Manager Accounting used in an ad hoc way to Manager Accounting organized to be simpler and quicker to use and organized to make better use of Manager’s features.

I have more questions. But not on the same topic as this thread. So, I will check the guides and search the forum. If I don’t figure out what to do from the guides and searching the forum, I’m glad I can ask you, Tut.