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    tonypezz's Avatar
    tonypezz Posts: 1, Reputation: 1
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    #1

    Mar 6, 2014, 03:25 PM
    Journal Entry for Reimbursed Expenses
    A client is reimbursing us for improvements we have made on an asset, and then purchasing the asset. Should this be two different journal entries? How can I balance the first entry? I have been capitalizing the expense (DR asset, CR cash), not sure where to go from here!

    Thanks so much!
    Fidget1's Avatar
    Fidget1 Posts: 105, Reputation: 4
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    #2

    Mar 7, 2014, 11:21 AM
    I'd be inclined to treat the reimbursement for improvements as a deposit on the overall sale of the asset. In which case you just set up a deposit account in current liabilities in the balance sheet and credit that account and debit bank account with the amount of the reimbursement. Then the deposit account will be cleared off by a debit to it, and a corresponding credit to the disposal account when the asset is actually sold.

    You don't say what these improvements are, but remember though that further expenditure on an asset can only be capitalised if it in some way enhances the future economic benefit an organisation can expect to get from it as a result of the improvements.
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