Pass-Through Expenses
PBrooksMac
Member Posts: 5
Hello! We operate a small baseball club organization, and we often pay things like tournament entry fees and league dues on behalf of our parents, who later reimburse us for those expenses.
As of right now we are invoicing the parents and showing this as revenue, and our payment to the league/tournament is shown as an expense. My concern is that this really isn't revenue, as we don't mark it up in any way...it is strictly a pass through payment.
Is our current method appropriate, or is there a better way to properly account for this as non-revenue?
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Comments
It's wrong, but just because it'll make all of those transactions appear on your Profit and Loss report, @PBrooksMac, but you're pretty much there. I went through something similar when I used a business on Wave to track things for my book club (I know, I know, I'm a stereotype of a suburb mom).
You'll want to record that to an asset account instead. Basically, you'll treat it like if it was Accounts Receivable (you can put it in the same account type). When you pay for it, create an expense to that category in your accounting and create an income to the same one when you get the money back.
If you still want to use invoices to collect that cash after the fact, just make a journal entry after the invoices are paid between Sales and that new account you made. I used the first option (nobody needed an invoice to pay $10 paperbacks back, really), but it comes down to what works for you.