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How to Account for Employee Reimbursements
How to Account for Employee Reimbursements

If you use Ramp, you are in luck! If not, here are some more details

Luke Frye avatar
Written by Luke Frye
Updated over 5 months ago

Reimbursements, sometimes called "Expenses" are a necessary and tedious part of the month end close process and critical for accurate financials.

Let's define reimbursements as: money paid for business items out of personal funds, usually an employee that needs to be reimbursed.

If you use Ramp for reimbursing employees for out of pocket expenses, then this is mostly automated for you. As long as you've synced Ramp, the detail of the reimbursement will flow through to Puzzle.

If you don't use Ramp, then here are a more details:

  1. Breaking the cash reimbursement out into individual line items (cash method).

    This method is more reactive and requires the cash payment for the reimbursement to be completed before you can record the details.

    Find the cash transaction for the reimbursement in "Transactions". Then split the Transaction for each line item of the expense report.

    1. Be sure to add a copy of the receipts or corresponding expense report at the bottom of the transaction.

    2. You could also paste a live link to another data-source where the expense report lives (eg Google Drive or Dropbox).

  2. Accounting for reimbursements chronologically (accrual method).

    This method is more proactive, keeps your books up-to-date, and maintains closer to accrual books. You don't have to wait for the cash to settle to enter the details.

    1. Enter each reimbursement item as a Manual Journal Entry (MJE), debiting the expense, and crediting "Employee Reimbursement - Clearing" (you could do a full expense report in one go or one MJE for each individual receipt).

      1. Be sure to add a copy of the receipts or corresponding expense report at the bottom of the transaction.

    2. Categorize the cash transaction for the reimbursement to "Employee Reimbursement - Clearing".

Gusto

Gusto is great for actually remitting the payment to your employee—or you—for payments made on personal cards for business purchases. The problem that is we are still missing the underlying detail of what the expenses were for. That is, we see Gusto push over a reimbursement of $100 in addition to your pay, but we don't know what the reimbursement was for. Did you buy $100 of bitcoin (is that possible!?)? Was this a dinner out?

In Puzzle, we pin that number to Employee Reimbursement - Clearing. So if you never make an adjustment (see options 1 & 2 above), then this balance will continually increase until you break out or add journal entries for the underlying expenses.

Just remember, from a record-keeping standpoint, you must still enter the "expenses" that make up the reimbursement into Puzzle after you've entered the total to reimburse via Gusto.

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