4

I'm new to accounting and just started using GnuCash for my personal finances.

Question

As an employee (not a company), how would you enter the following transaction into GnuCash?

Situation

  1. I make phone calls for my employer with my private phone, which costs me USD 30.- per month. I pay that with my personal money.
  2. At the end of the month, my employer pays me my salary plus USD 30.- for my phone expenses.

Idea

Create the following accounts in GnuCash

  • Personal bank (assets account)
  • Phone expenses (expenses account)
  • Salary (income account)

Create the following entries.

 1. Me paying my phone bill towards the end of the month.
    Personal bank                 30
    Phone expenses        30

 2. Employer paying me at the end of the month
    Salary                      2030
    personal bank       2030

    Phone expenses                30
    Salary                30

I'm not sure whether that is correct. Should phone expenses perhaps be a debit asset account because that's money someone owes me and I will get sometime in the future?

Research

  • Are you eligible to claim use of your phone against taxes? In Canada, for example, you can only do so if the employer specifies this in the contract of employment and fills in the T2200 and checks the appropriate boxes. – ChrisInEdmonton Jul 23 '14 at 19:09
  • @ChrisInEdmonton No, I'm not. The employer sends me two payments: one for the salary and one for the phone expenses. The phone expenses don't show up anywhere on the tax papers. In my example above, I should have separated the 2030 payment into two payments: 2000 and 30. – Lernkurve Jul 23 '14 at 20:18
  • 1
    In the U.S., at least, if your employer reimburses a business expense, you cannot take a tax deduction for it. That wouldn't make logical sense: how can you be entitled to a deduction for an expense that someone else -- the employer -- paid? I rather doubt Canada is any different. – Jay Jul 25 '14 at 14:07
2

There is not one right way. It depends on the level of detail that you need. One way would be:

Create the following accounts:

Personal bank: asset
Phone expense: expense
Reimbursement due from employer: asset
Salary: income
Reimbursements: income

When you pay the phone bill:

Debit phone expense $30
Credit personal bank $30

Debit reimbursement due $30
Credit reimbursement $30

When you are paid with the reimbursement:

Debit personal bank $2030
Credit reimbursement due $30
Credit salary $2000

That is, when you pay the phone bill, you must debit BOTH phone expense to record the expense, and also reimbursements due to record the fact that someone now owes you money.

If it's useful you could add another layer of complexity: When you receive the bill you have a liability, and when you pay it you discharge that liability. Whether that's worth keeping track of depends. I never do for month-to-month bills.

Afterthought:

I see another poster says that your method is incorrect because a reimbursement is not salary. Technically true, though that problem could be fixed by renaming the account to something like "income from employer". The more serious problem I see is that you are reversing the phone expense when you are reimbursed. So at the end of the year you will show total phone expense as $0. This is clearly not correct -- you did have phone expenses, they were just reimbursed. You really are treating the expense account as an asset account -- "phone expenses due to be reimbursed by employer".

3

I think you're on the right track. Your #2 journal entry is incorrect. It should be

Salary                    2000
Personal bank      2000 

Phone expenses              30
Personal bank        30

(I usually put the debit entry on top, but I followed your formatting)

I'm assuming your employer uses an accountable reimbursement plan (reimbursing you when you turn in your payment bill/receipts). This is not salary. Reimbursements under the accountable plan in the US are not taxed as income.

If you think about it though, "phone expense" isn't really your phone expense. So, instead of #1 entry, you could make an account receivable, or other current asset account, maybe call it Reimbursables - cellphone, and debit this account, and credit your cash account.

When you receive the $30 back, you will reverse the entries on the day of payment.

If you do it this way, you should be able to see a list of receivables outstanding (I'm not too familiar with GNUCash but I'm sure it has this type of report).

  • Reimbursements most certainly CAN be taxable, depending on exactly what it is about, and of course on the tax codes for your country. – ChrisInEdmonton Jul 23 '14 at 20:30
  • You're right. I edited the sentence to be more specific. – guest Jul 23 '14 at 20:41
0

Nope sorry guest you are wrong. how can salary and an expense be on the same side of the ledger?

Salary 2000 Personal bank 2000

Phone expenses 30
Personal bank 30

0

Your debits and credits are perfect.

Now, it comes down to a choice of how you want your accounts organized, financially speaking.

In terms of taxes, it's recommended you keep a separate set of books just like a corporation and account for them strictly according to law.

It's best not to credit phone expenses since it will no longer show on your net reports. A better alternative would be "Phone reimbursement". With that, you can not only see if you've been compensated but also how much you're personally managing these expenses by checking the annual "Phone expense" account.

This is all up to personal preference, but so long as you're properly balancing your accounts, you can introduce any level of resolution you wish. I prefer total resolution when it comes to financial accounting.

Also, it is not good practice to debit away "Salary". The net of this account will be lower and distorted. An expense reimbursement is not salary anyways, so the proper bookings will follow below.

Finally, if GnuCash is calling "Salary" an income account, this is unfortunate. The proper label would be "revenue" since "income" is a net account of expenses from revenue in the income identity.

Entries

With this, your books will become clearer: your cash assets will remain as clear as you had organized them, but now your income statement will provide higher resolution.

 1. Me paying my phone bill towards the end of the month.
    Personal bank                 30 (asset)
    Phone expenses        30         (expense)

 2. Employer paying me at the end of the month
    Salary                      2000 (revenue)
    Phone reimbursement           30 (revenue)
    personal bank       2030         (asset)
0

I think from your point of view those are not phone expenses but rather a kind of load you make to your employer (so, an asset, as you suggest):

Phone bill payment                   Dr      Cr
  Asset:Checking Account                     30
  Asset:Reimbursments Owed           30

Later your employer pays you back:

Money from Employer                  Dr      Cr
  Asset:Reimbursments Owed                   30
  Asset:Checking Account             30

(See also this answer to a similar question.)


If your phone bill includes personal phone calls, and your employer's bank transfer includes your salary, you can use split transactions as suggested by user11865. Say your phone bill includes $30 of calls you made for your employer and $50 of personal calls, then your payment would look like:

Phone bill payment                   Dr      Cr
  Asset:Checking Account                     80
  Asset:Reimbursments Owed           30
  Expenses:Phone                     50

And if $2000 of salary is bundled in your employer's deposit, your incoming bank transfer transaction would look like:

Money from Employer                  Dr      Cr
  Asset:Reimbursments Owed                   30
  Income:Salary                            2000
  Asset:Checking Account           2030

It may seem strange that these $30 of phone calls are never recorded as expenses, but if you think about it, those are not your expenses, they are expenses that your employer incurs in the course of doing business. So in their accounting, their payment to you may look like:

Bank transfer to Lernkurve           Dr      Cr
  Assets:Company Bank Account              2030
  Expenses:Salaries                2000
  Expenses:Phone                     30

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