What is the accounting treatment for reimbursable expenses?

Question

I work for a law firm.  Often, the attorneys pay in advance any costs they incur on behalf of a client (i.e. court parking fee, legal research fees, court filing fees, etc.) and bill the client afterwards.

I know that when clients reimburse the attorney, it's not considered income.

So what should the accounting entry for this transaction be like?

I was thinking...

DR Advanced Client Costs (Other Asset)
CR Cash (Current Asset)
To record expenditure of an atty on behalf of a client

Then...

DR Cash (Current Asset)
CR Advanced Client Costs (Other Asset)
To record payment of client for a reimbursable expenditure.

Am I correct?

Sandy · Accepted Answer

Yes, you could do it your way, except that I would term it as Recoverable Client Costs. And don't forget to track the incurring of the costs and the recovering. You should be able to tell the attorneys what is sitting in the Advanced Client Costs account - broken down by client name and amt.

ScorpionSDGuy · Answer

I would
Debit--- Cash Account
Credit--- Acount's Receivable

When the Client Pays.
Credit -Cash Account
Debit- Account's Receivable

bilbobagsend · Answer

payment of expenses is not income what i would do is use the funds to pay the expense item and show it in other income as payment of expenses

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What is the accounting treatment for reimbursable expenses?

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