Markup on Reimbursed Expenses

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We are a service firm. As a general rule any expenses that are billable to the client are marked up by a percentage. However, sometimes we do not markup the expense. Since the expenses are billable to the client, we make the following entry to record the expenses (on expenses that are not marked up)...

DR: Accounts Receivable - Client
CR: Credit Card Payable

What if the expenses are marked up? There should be an additional credit, but to what account? An income account?
 

kirby

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Well, you don't "markup" any expenses when you pay for them . You add the "markup" to the billing.

Example

CPA firm pays consultant X to do a study for client Y. Study costs CPA firm $10,000

DR Consulting Exp $10,000
CR Cash $10,000

Next CPA firm bills client for the work plus a 10% markup

DR Accts Rec $11,000
CR Fee Income $11,000

and the $1,000 difference between what you billed client and paid consultant is your markup.
 

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