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Re: Handling Employee Expenses

I am posting this for the sake of the archives, since the solution was 
developed under another thread.

In this post:


Jeff Roberts explains a solution for handling employee expenses, which 
works well, and covers both the AP Transaction and Vendor Invoice methods 
of paying the vendor.

In following his example, however, in the last paragraph, it is necessary 
to use "Cash -> Payment" (or Payments) to handle balancing the accounts, 
instead of what he advises ("Cash -> Receipts" or "Cash -> Transaction").

The basic process is this:

Create two vendors: the one the product/service was acquired from (call it 
"Real Vendor"), and the employee who paid the expense (call him "employee 

You need two accounts.

The first should be a pseudo checking account (like the 1060 account in 
standard LedgerSMB charts), but with its type set as "Liability".  It will 
have the payment checkboxes selected under receivables and payables.
I called mine "Employee Paid Expenses".

The second account is an AP summary account.  Create a new account (for 
example 2105, so it sorts after your normal Accounts Payable account), 
with the type set to liability.  Select "AP" in the summary section.  I 
called mine "Payables Clearing Account".

The process:

Create an AP Transaction or Vendor Invoice to the "Real Vendor" as normal.
In the payments section, record a payment out of the "Employee Paid 
Expenses" account.

After you post it, go into Cash -> Payment.  Select the "all" checkbox, 
and hit update.  Choose "Employee Vendor" as the vendor, and hit continue, 
if you are presented with a screen asking you to do so.  Note, that 
because of a bug in some versions of LSMB, you may have to choose the 
vendor a second time from the dropdown, and hit update.

Set the AP account to the "Payables Clearing Account" (or what ever you 
called the summary account), choose your real bank account, and enter the 
other details of the check you are issuing.

Post the payment, and then go to Cash -> Payments.

Check the box for the outstanding AP transaction which has been created, 
and which includes the negative amount you were just working with.  Hit 

Choose the "Payables Clearing Account" as the AP, and the "Employee Paid 
Expenses" account as the bank account, and make some meaningful note like 
"Employee Expense Clearing" in the memo field.

Once you post this, the accounts should balance, and your employee expense 
is handled.

Of course, you may want to break up the check issuing (cash -> payment), 
and balancing (cash -> payments) portion of this process into a bulk 
transaction at the end of the month/quarter/what ever, to save yourself 
some work, and pay several expenses at once.

Hope this helps someone.


On Thu, 31 Dec 2009, Michael Richardson wrote:

> >>>>> "Luke" == Luke  <..hidden..> writes:
>     Luke> On Tue, 15 Dec 2009, Michael Richardson wrote:
>     >> I created a banking account, "Michael Richardson Expenses", and I
>     >> pay Company B from this account.  It goes negative, so I create
>     >> an AP Transaction that then fills this account, and issue a
>     >> checque to "Michael Richardson"
>     Luke> Wouldn't that result in it going even more negative?
>     Luke> Basically, you're paying two vendors out of the same account.
> It looks something like:
> PART 1                                       
> (AP transaction against, say, "Grand and Toy", attach receipt to printout)    
> "Office Supplies" (expense account)              +$10     
> "Accounts Payable"                                         +$10
> "Michael Richardson expense" (asset account)     -$10
> "Accounts Payable"                                         -$10          
> PART 2
> (AP transaction against, vendor "Michael Expenses")
> "Michael Richardson expense"                     +$10
> "Accounts Payable"                                         +$10
> "Checquing Account"                              -$10
> "Accounts Payable"                                         -$10
> Of course, I do not do PART 2 every time, but rather only when the
> amount is enough to bother.