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There are many instances when we have to pay for expenses in advance and then we'll be reimbursed by a client. There are different methods that we can use to actually record this income. Let's talk about three of them. First, two are going to be Profit and Loss-based. This means that when we are going to record the expense or the income coming from our customer, that it's actually going to go on our Income Statement. The first method we use what we call an Offset Account. I'll pay the bill and post it to a regular expense account. When QuickBooks registers that expense, it'll automatically invoice it to the customer and then credit back that same account. It'll be a wash on the books. Another method, again, with the Profit and Loss focus is not to use the Offset Account but two separate accounts. In this case I'll have a Reimbursement Income Account and a Reimbursement Expense Account. When I pay the bill, it'll post to that Cost of Goods or Regular Expense Account. However, it'll never zero itself out. When I actually charge the client, it will post the reimbursement to an Income Account. Both of these have the same impact on the Income Statement's bottom line because they eventually zero themselves out. It's just a matter if you want to track them individually. Another method eliminates the entry on the Profit and Loss Statement and actually sets it on the Balance Sheet. Here we'll set up another current asset account and we'll call it Reimbursable Costs. What'll happen is when we expense it out, we'll go to this Balance Sheet Account, when we are reimbursed by the client, it'll zero it out from the Balance Sheet. Now, which of these methods that you actually use is going to depend on your unique situation. I encourage you to talk with your accountant to find out which is going to be most appropriate for you. Now, let's go into QuickBooks and see how these work. If I go into QuickBooks and look at a Profit and Loss Statement, you'll notice here that there is a Reimbursement Income Account and a Reimbursement Expense Account. The concept with these two accounts is I can see that my expenses have only been 3600 dollars; however, I have not yet been reimbursed for any of those items. It clearly lets me see that I need to do some research to find out where these expenses are. Now, had I used just a Job Expense Account, what would happen is they would eventually zero themselves out. In this regard, if I see a balance, once again I would know that I did not bill everything out. Either method, the way we record the expense is going to be identical. For example, let's close out of our Profit and Loss and let's actually go ahead and write a check. When I write this check, let's go to the City of Bay Shore and say that we had a 25-dollar fee for some printing and reproduction. Now, in this example I'm going to actually go to the Printing and Reproduction Account and I'm going to go ahead and choose Christy's Family Room. Notice on my check that it comes up as Billable right away. Let's Save and Close and then pretend we're ready to bill out Christy. When I go into the Customer, back to the Family Room, you'll notice that it's right away taking me to the Billable Time and Cost and I do want to set them so I'm going to say OK. If I go to the Expense Account, you'll notice here's my charge for Bay Shore. Now, there's now way of knowing that this is going to clear through to the Printing and Reproduction Account. That was established earlier when I set up QuickBooks. I'm just going to go ahead and say OK. OK, at this point here is my actual rate for that reimbursed expense. Now, you'll notice that no actual account has been assigned to it yet. It is at this stage that I can set up my account to determine which account should be hit. For example, let's go into our List, let's go down to our Item List and let's just put a New Item in. When I go into the New Item, I'm going to set it up as an Other Charge and in My Item, I'll simply call it Reimbursement. It is at this point in the account that I can choose whether I want to track it against the originating expense account or as a Reimbursed Expense or if I'd like to track it against my actual Balance Sheet items, I can then go to a reimbursable expense on the Balance Sheet. The idea here is to think it through in advance. In this particular case, since we were actually in an Expense Account, I would want to go back to the actual Expense Account that was used. When I say OK, now by choosing that reimbursement on an Invoice, I will now ensure that it clears out correctly in the background. Had I not set up this Item, I could end up with an out-of-balance situation. So the key will be to choose in advance which concept that you want to use in writing a check. When you write a check, here is where you'll choose whether it's an Expense Account, whether it's a Balance Sheet Item or whether it's a Cost of Goods. When you're going to clear it via the Invoice, you will then set up an Item that will once again either go to the Balance Sheet Account, to a Reimbursement Income Account or to the Expense Account.