Reimbursement Accounts (2025)

FAQs

How do you account reimbursement in accounting? ›

Add the expense and reimbursement to your accounting records. You may choose to add the reimbursement as a short-term loan so that it disappears from your books after the client pays it. Another option is to list your original payment under expenses and the repayment from the client under revenue or income.

A reimbursement account is one in which employees are repaid for any business-related expenses they may incur. A reimbursement account is typically linked to an employee's salary account and does not require a minimum amount.

Reimbursement is money paid to an employee or customer, or another party, as repayment for a business expense, insurance, taxes, or other costs. Business expense reimbursements include out-of-pocket expenses, such as those for travel and food.

The key to the journal entry or accounting treatment for reimbursable expenses incurred by employees is that since it is a legit business expenditure at its core, the P&L impact is recorded the moment the employee spent the money instead of when the business reimburses the employee – see below for an example.

In these situations, the funds received from the other party should be recorded as a reimbursement of expenses and not as revenue. Revenue should only be recorded as the result of revenue-generating activities, like providing a good or service.

Even if the funds are reimbursed through payroll, the expense reimbursement amount should appear as a separate item that is not subject to any taxes. For the business, an expense reimbursement is considered an expenditure and will likely reduce the amount of tax you'll pay.

Reimbursement is when a business pays back an employee, client, or other people for money they spent out of their pocket or for overpaid money. Some examples are getting money back for business costs, insurance premiums, and overpaid taxes.

by Intuit• Updated 1 month ago

Reimbursements are non-taxable payments you pay to your employees if they've paid business expenses out of their own pockets. This type of payment doesn't appear on any of your payroll tax forms.

Purpose: To describe the procedures and processes for the four stages in reimbursable accounting; funding; orders received; earned reimbursements, and the collection of accounts receivable.

What is included in reimbursement? ›

In simple words, reimbursement is money you get back from a previous transaction you have made while buying something for yourself or making a payment on behalf of a third party. You can experience reimbursements in a lot of your day-to-day activities and purchases that you make.

By holding the reimbursement account, customers can receive their reimbursement dues from their employers from business trips, outings, etc., on behalf of the company/organization.

A cost-reimbursable expense refers to a reimbursement method where the amount refunded to the employee directly reflects the actual expenses they've incurred. In this setup, the company repays the precise sum the employee has spent on work-related tasks rather than a fixed or estimated amount.

REIMBURSEMENTS are separate and distinct from REFUNDS.

You generate a credit for reimbursement.

Form W-2 - Employee Expense Reimbursements. Substantiated employee business expense reimbursements are reported on Box 12 of Form W-2 Wage and Tax Statement. If you don't use this expense, the unused amount would be taxed as wages.