We have completed our financial statements for prior years. We collected a check for prior year reimbursement. My co-workers are saying put it to the expense account is was taken from. I say no because the year has closed. Consider it non-operating income.

What do we do?

Let me see if I have this straight.

In 2006 you incurred an expense, let's call is X Expense.

However, now in 2007 you get a cheque to reimburse you for it.

Then go back to the 2006 statements and
Dr. Cash
Cr. Expense

That is, lower your expenses from 2006.

Why?
GAAP – Matching Principal