Revenue vs. Expense Reimbursement

Occasionally, the university makes an agreement with an external entity to share the expenses of a particular activity. It might be more efficient or convenient for the department to initially pay all the expenses; however, the cost of that activity on the university’s books should only reflect its share of the expenses. In these situations, the funds received from the other party should be recorded as a reimbursement of expenses and not as revenue. Revenue should only be recorded as the result of revenue-generating activities, like providing a good or service.

If the agreement with the external entity relates to a revenue-generating activity (e.g., a conference), then the full costs of the activity should be reflected, and support from an external entity would be considered another source of revenue. This determination can sometimes be difficult; consult with DFS for assistance.

The following are examples of when a receipt should be treated as an expense reduction:

• Refunds or rebates from a vendor for goods or services purchased from the vendor.
• Reimbursement of personal usage of university resources, such as a photocopier, by employees when the resources involved are typically not used to provide services on a fee-for-service basis.  Such usage is normally not allowed, but may happen for insignificant and incidental items.
• Reimbursement of items purchased to facilitate an activity (e.g., selling t-shirts at cost to participants of the activity). Note: There may be sales tax implications; contact the University Tax Office.
• Reimbursements from employees or students for lost university property.
• Payment of worker’s compensation claims from an insurance company.  In this case this is an expense reduction, because it reduces the cost of lost productivity.

To make an entry for expense reimbursement, make a credit entry to decrease the expense and a debit entry to note the reimbursement. For example:

DR  Cash (system generated entry on object code 1000)

CR  Expense (corresponding to the initial expenditure)