[ruma saw]

Please help with this Journal Entry.(Cash Basis)
One of our client (business owner) had Travel expense of $1,159.00 which he paid out of his business credit Card, He got the reimbursement of $1,200.00 as debit card on his personal name not in the business name. He used that debit card to buy software of $1,200.00 which is his Cost of good sold.
1) When he made travel expense Dr Cr
Travel Expense $1,159
Business Credit Card $1,159.00

2)When he got Debit card on his personal name –No entry has recorded on book because it wasn’t on his business name.

2) When he bought the software which is his cost of good sold
Cost of good sold $1,200
Travel Expense $1,159
?

[IwannabeaCPA2017]

Hey Ruma, think someone in Audit is better suited to make this entry than myself since I'm in tax and rarely make AJE LOL. But your second entry doesn't balance so theres def something wrong. HEres my guess:

DR: Travel expense 1159
CR: Payable 1159 (on Credit Card)
When reimbursed: even though it is his personal and not business I still think they need to adjust the business to make it right?
DR: Payable 1159
CR: Travel expense(possibly) 1159
Now my confusion is why did he get reimbursed for more than his travel? Not sure what to do with the difference.

Purchases: DR: Software 1200
CR: payable 1200

I could be totally wrong on all this.. guess that is why I am still taking FAR LOL. But I am interested as this is real world example and much more helpful than just studying the book stuff. Will follow this post.

[Missy]

Yes the entry for the travel expense is

Dr travel expense 1159
CR credit card 1159

Not enough info on this 1200 debit card, you're saying the CLIENT gave this person a $1200 debit card to reimburse for 1159 in travel expenses that were put on a business credit card? Sounds shady, is the person paying the business credit card himself? It doesn't matter whose name is on the debit card, where did the $1200 come from? Treat it like an employee advance imho:

Dr employee advances 1200
cr cash (if that is how the debit card was obtained) 1200

regarding the software what exactly is it being used for? It should only go to cogs if he is going to turn around and sell the software to someone else (another can of worms entirely) but what is their dollar limit for capitalizing vs expensing? If its to be capitalized the entry would be

Dr asset-software $1200
cr employee advances (if it was that debit card used) $1200
Otherwise

Dr software expense $1200
Cr employee advances $1200

please note my entries above still leave a payable to a credit card which you never mentioned being paid.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[ruma saw]

I am sorry I haven't put enough detail , client didn't reimburse any one but he got the reimbursement of $1,200 for travel expense .
He has attend the Facebook seminar , he booked the ticket using his business credit card , later on Organization (Facebook Seminar) gave him $1,200 debit card as reimbursement of his travel expense, which he used to buy a software (he makes software) and he used that software to make software which he sells to customer that's why I used cost of good sold.
Hope this helps.

[Missy]

So in that case the debit card has nothing to do with anything.

Debit travel expense $1159
Credit (whatever means he used to pay the expense up front)

The debit card has nothing to do with the business and it doesn't matter that he spent less than they provided as travel expenses (at least to you.)

The software is still not cost of goods sold, even if used to make other software. Just like the machinery used to make cars doesn't go to cost of goods sold, or the oven at a bakery. Its either capitalized or expensed.

Licensed Massachusetts Non Reporting CPA since 2012
Finance/Admin/HR Manager

[Radez]

I didn't see the additional information before posting. So your client's business (business credit card) spends 1159 to travel to a conference. Dr travel expense, cr payable. Conference pays the individual $1,200 as a reimbursement of travel expense. To me, the business would have an interest in that debit card in the amount of $1159 dollars, which would create a receivable from the employee, which would subsequently be eliminated by the purchase and donation of software to the business. Otherwise, I agree with Missy on the software amortization or expense. Typically, assets used for software development would be R&D expense.

This presupposes that business assets and owner assets are separate.

[ruma saw]

Thank you for the help .

[Author]

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