I am a freelancer; some of my clients pay me as an employee and some as a contractor. I have separate expense accounts for expenses I incur as a contractor and as an employee because as an employee, unreimbursed expenses are not tax deductible.
At the beginning of the year, I created an income account called Reimbursed Expenses so those amounts wouldn’t be included with taxable income; however, that means that the amount of the cost I incurred is still in the expense account. Rather than having reimbursed expenses post as credits to an income account, I would prefer to debit the appropriate expense account to decrease the balance so it correctly reflects tax deductible expenses.
I would also rather not use a separate receivable account for expenses for which I expect to be reimbursed because I do still want those transactions in my expense account so I can see how much I spent on say hotels regardless of whether it was reimbursed or not. If I use a separate receivable account, those charges would never hit my expense account and would just go back and forth between two asset accounts, my bank account and the reimbursable expenses receivable account.
When I’m generating an invoice though, GnuCash doesn’t allow me to select an expense account as the transfer account. Is there a way for me to credit my checking account and debit my expense account when I pay for something, then when I invoice it, credit the expense account? That way I could open an expense account and see all my hotel charges, but not have the ones that aren’t tax deductible included in the balance for the account. Right now when I process a payment, it just debits my bank account and credits the receivable.
Do I need to enter a completely separate transaction that debits the reimbursed expenses income account and credits relevant expense account? That seems tedious and redundant since it would be completely outside the invoice and process payment functions and leaves a lot of room for error. The balance in my reimbursed expenses income account wouldn’t zero out because I also have mileage reimbursement payments in there. So if I miss an expense, I wouldn’t be able to tell without auditing the whole account and checking all my invoices to see if a line item was mileage or an expense.
I’d appreciate any help or advice, thanks!