Expense and Sub-sequential Refund 8 months apart

by Molly
(Portland, OR)

I am a bookkeeper for a non profit organization. We paid an unemployment benefit expense in December of 2008 and last month received a credit from the unemployment department. Essentially this is a reduction in the expense we had and not income.

If I credit these funds to the expense account there will be a negative number for that account for the profit and loss report this month and the profit and loss report for our taxes. Should I account for this income as miscellaneous income?

Or I could back date the income with an invoice, but then this would change all of the balance sheet reports I have created so far this year.
Thank you for any help you can provide in this situation.

Hello Molly,

Thank you for your question.

It is best to record the transaction when incurred as opposed to backdating with an invoice and changing all of your previous reports.

Since the credit was for a prior expense, you should go ahead and credit the expense account rather than recording it as miscellaneous income.

It should be fine with the expense account showing a negative balance on the monthly reports. However, you may wish to include a note in your files explaining that it is a credit for an expense paid in a previous month.