16.3. Attività correnti

This section explains short-term receivables, reimbursable expenses, travel advances, prepaid premiums, prepaid rent, suspense or wash accounts.

16.3.1. Short-term Receivables

This kind of account is useful to reflect an agreement made with someone you trust. Suppose you lent someone $500 and he agreed to repay you $50 a month. If he paid on time, the loan you made would be paid off within a year, which is why it is classified as a short-term receivable. So you could record that loan initially in this account tree: OtherAssets:Current Assets:LoanToJoe. At the time you give him the money: your entry is debit (increase) LoanToJoe $500 and credit (decrease) Bank $500. Each time you receive Joe’s payment you record $50 debit (increase) to Bank and credit (decrease) LoanToJoe.


Don’t become confused by the use of the word «Loan». «Loan-To» is the tipoff that you really have a receivable, that is, you will receive from Joe, the money you previously loaned. Until he actually pays the money owed you, you reflect his debt in your books by an account describing your expectation–you will receive the money owed you, hence the word «receivable».

16.3.2. Spese rimborsabili

This kind of activity is one in which you spend your own money on behalf of someone else (your employer, perhaps) and later you receive repayment of what you spent. The case might be a business trip. The employer has a policy of covering (paying for) all authorized expenses. After the trip is over, the employee submits a report listing dates and amounts spent with receipts for all the expenditures. The employer reviews the report and pays for all items that it considers as having a valid business reason. (Normally, employees know in advance what the employer will reimburse, so only those items are recorded as a reimbursable expense on the employee’s books.)

Because a business trip can involve different kinds of expenditures (air travel, lodging, transportation at the destination, etc.), different kinds of expenditures would be recorded in the one account as long as the expenditures all related to the same trip. In other words, if a second trip is made before the first is fully settled, a second account for a different event could be set up. It would make sense to do this, if it would help to keep separate all the details of one trip from those of another. It is up to the person making the trip to decide how much trouble it would be to put separate trips in separate accounts or to put them all in the same account. The trip taker should remember that the account must be reconciled in order to know with certainty that all expenses have been reimbursed.

Recording the expenditures on the trip would be much the same. That is, if you paid trip expenses by cash you would debit (increase) the reimburseable expense account for the money paid in cash, because it is a receivable to you until it has been reimbursed to you. The credit offsetting your expenditure would decrease the account that shows the cash in your pocket or the account from which you drew the cash for the payment made. If you paid by credit card, the debit side would be the same as just described, but the credit would be an increase to the credit card company account on your books.

When you received your reimbursement, then the journal entry (or transaction) to record receipt of the funds from the employer would be: debit (increase) Bank for the check amount and credit (decrease) the reimbursable expense account for the check amount.

If it turns out that the reimbursable expense account is not zero balance after processing the employer’s payment, then it means that there is a difference between you and the employer in handling the expense, which needs to be investigated. If the balance is a debit (a positive balance), your account has some money that was not reimbursed. If the balance is a credit (a negative balance), you were paid for more than what you recorded as due you. In both of those situations you should reconcile the difference between what you recorded and what was paid. That effort should disclose exactly what is causing the discrepancy. You will need to contact the employer’s bookkeeper to know what was paid, if the reimbursement check was not accompanied by a detailed list of the items being paid you.

In the event the employer refused to reimburse you for an expenditure, that effectively makes it your expense. In that case, you would make this entry: debit (increase) your own Expense (appropriately named) and credit (decrease) the Reimbursable Expense account. That entry should result in a zero balance in the Reimbursable Expense account. If not, reconcile until you identify the difference.


Sometimes there are small differences that don’t match an individual entry. In those cases divide the amount by 2 or by 9. If the unresolved amount is divisible by two, it suggests that both you and the employer entered the item in the same manner: both as debits or both as credits. If it is divisible by 9, then likely one of you transposed adjoining numbers; e.g., one entered 69 and the other entered 96. If the difference is divisible neither by 2 or by 9, then it could be that more than one error is present.

16.3.3. Travel Advances

These are very similar to Reimbursable Expenses. The difference is that someone gives you money first; you spend it, and then you give a report accounting for what you spent it on. The report is supported by invoices establishing who, what, where, when, and how much for each expenditure. In the Reimbursable Expense case, you spent your money first and later recovered it.

In the Travel Advance case when you receive the advance, you record on your books this entry: debit (increase) Bank for the travel advance amount received (say, $500); credit (increase) the short-term liability Travel Advance ($500). This is a liability, because you are not gifted with the money, but only loaned it for the purpose of having funds to spend when doing the employer’s business.

Frequently, the way these monetary arrangements work is that at the beginning of for example a salesperson’s employment, he or she receives the advance and monthly (or more frequently) turns in a report about who, what, where, when, and how much he spent. The money in the report is reimbursed if approved.

During the period after receiving the advance and before filing a request for reimbursement report, the salesperson can record his or her expenditures into the advance liability account. In that case, the balance in the account will show how much of the advance has not yet been spent (assuming the Travel Advance balance is a credit). If no mistakes have been made and all expenses are approved, then the sum of the unspent account balance and the reimbursing check amount will equal the original travel advance amount.

It makes sense for the salesperson to record the travel expenses to this advance account (and not to his or her own expense accounts), because the money is being spent on behalf of the employer, for the employer’s authorized expenses. It is not the employee’s own money, and therefore not his or her own expense.

When the salesperson receives the report reimbursement (say, $350), he or she debits (increases) Bank, and credits (increases) again the Travel Advance liability account, assuming that previously he or she had been recording expenditures to the travel advance account. Tracking activity in this manner causes the account to always show the amount that is owed the employer.

See Sezione 16.3.2, «Spese rimborsabili» above for what to do if the employer does not accept an item the employee put on the travel advance reimbursement request report. The difference resolution effort is essentially the same for both types of accounts.

16.3.4. Prepaid Premiums or Prepaid Rent

Some types of expenses are usually billed as semi-annual or annual amounts. For example, the insurance industry will bill home insurance annually, while car insurance premiums can be annual or semi-annual. For those that pay an amount that covers several months or a full year, the proper accounting treatment is to reflect in each accounting period the amount that expresses the benefit applying to that period.

In the case of someone who pays a full-year’s insurance premium at the beginning of the insurance period, the entry to record this is debit (increase) Prepaid Insurance Premium for say, $1,200, and credit (decrease) Bank for $1,200.

Then a monthly recurring journal entry (scheduled transaction) is created that debits (increases) Insurance Expense $100 and credits (decreases) Prepaid Insurance Premium $100. This technique spreads the cost over the periods that receive the insurance coverage benefit. Businesses following generally accepted accounting practices would normally use this technique, especially if they had to present financial statements to banks or other lenders. Whether individuals do depends on the person and how concerned they are to match cost with benefit across time periods. Another factor influencing use of this technique would be the number of such situations the person encounters. It is relatively easy to remember one or two, but more difficult if having to manage 10 to 20. You would set up as many or as few as proved useful and important to you.

16.3.5. Suspense or Wash Accounts

The purpose of these accounts is to provide a device to track «change of mind» situations. The objective of these accounts is to provide a temporary location to record charges and credits that are not to be included permanently in your books of record. When the transactions reflected in these accounts have been fully completed, Wash/Suspense accounts will normally carry a zero balance.

For example, say in the grocery store you see canned vegetables on sale, so you buy 6 cans at $1 per can. Say that the total purchases were $50. When you come home and are putting things in the cupboard you discover you already had 12 cans. You decide to return the 6 you just bought. Some persons in this situation would charge (increase) the whole bill to Grocery Expense; and when they returned the cans, they would credit (decrease) Grocery Expense. That is one way of handling that. The effect of this method is to leave recorded on your books the cost of items that you really did not purchase from a permanent standpoint. It is only when the items have actually been returned and the vendor’s return receipt has also been recorded that the distortion this method generates will then be removed.

Actually, there are several treatments, depending on when and how the original transaction was booked/recorded and when you decided to return the items purchased. Basically, did you change your mind before you recorded the transaction or after doing so?

If you decided to return the items after recording the purchase transaction, you may originally have charged Grocery Expense for the full amount ($50) of all items. In that scenario, what you kept and the amount of the items to be returned were grouped into one account. You could edit the original transaction and restate the amount charged to the Grocery Expense account to be the difference ($44) between the total paid ($50) for groceries and the value of the items to be returned. That leaves the returned-item value as the amount ($6) you should record to the Suspense account.

Obviously, if you decided to return items before you recorded your purchase, then you would book the original entry as a charge to Grocery Expense for the amount kept ($44) and as a charge to Suspense for the amount returned ($6). The off-setting credit ($50) to cash or credit card is not affected by these treatments.

When there are several persons shopping and at different vendors, there can be a case where there are several returns happening at once and in overlapping time frames. In that case the Wash Account is charged (increased) at time of changing the mind, and either Bank or Credit Card is credited. When the return occurs, the reverse happens: Bank or Credit Card is debited for the cash value of the returned items and the Wash/Suspense Account is credited in the same amount.

If the wash account has a non-zero balance, scanning the debit and credit entries in the account will show the non-matched items. That is, debits not matched by offsetting credits indicate items intended to be returned but not actually returned yet. The reverse (credits not matched by offsetting debits) indicates that returns were made but the original charge was not recorded in the Wash Account.

These differences can be cleared up by returning unreturned items or recording charges (debits) for items already returned. The mechanics of doing that likely will be finding the original expense account the item was charged to and making an entry like: debit Wash Account, credit original expense. It also could be as described above where the original recording is adjusted by adding a charge to Wash/Suspense account and decreasing the amount charged to the original account.