In the world of strata accounting, reimbursements aren’t inherently confusing—but they are sometimes recorded inconsistently. This can lead to budgeting challenges and, in some cases, the failure to properly recoup costs from owners.
Recording Reimbursements in Strata Financials: What Are Your Options?
Reimbursements occur when the strata company pays for an expense—typically on behalf of a lot owner—and is later reimbursed for that cost. While it's a common part of managing a building, how these transactions are recorded in the books can have a real impact on clarity, consistency, and auditability.
Here are three common approaches, and our take on each.
1. Record on the Balance Sheet – Cleanest and Most Accurate
This is our preferred approach. When the strata company pays for something that an owner will reimburse (e.g. a repairs expense related to a specific lot), the amount is recorded as a receivable on the balance sheet. It's not shown on the income and expenditure report at all.
When the owner reimburses the amount, the receivable is cleared, and cash increases. If all goes to plan, the balance sheet shows no lingering trace at year-end. However, if there is a leftover amount, positive or negative, this stands out and can be flagged for follow-up.
This method avoids distorting your income or expenses and reflects the economic reality: the strata company is acting as an agent, not incurring a true cost or earning true income.
The only potential downside? Owners reviewing the income & expenditure statement may ask, “Where did my payment go?” But as long as everything is cleared, there’s nothing to see—and that’s exactly the point.
2. Separate Income and Expense Lines – Common but Clunky
Another approach is to record the original expense as normal, and show the reimbursement received as income. If you go this route, it’s important to create a dedicated income line (e.g. "Owner Reimbursements") so it’s easy to reconcile.
If multiple reimbursement categories are needed (e.g. electricity, gas, other), be careful. It can become messy and hard to match transactions if not managed carefully.
The risk here is that reports start to appear busier than necessary, and inexperienced managers (or software!) may interpret the reimbursement income as actual revenue. This could even (in rare cases) inflate reported income for GST purposes.
3. Offset Against the Same Expense Account – Budget-Friendly but Requires Care
In this approach, both the expense and the reimbursement are coded to the same expense line. For example, a $1,000 repair fully reimbursed by the owner would net off to zero in the repairs and maintenance line.
This has the benefit of not inflating overall expenses—helpful when next year’s budget is being prepared based on prior year actuals. However, if the reimbursement step is missed, the transaction can slip through unnoticed. This method is only effective when it’s used with a clearly labelled, standalone account (e.g. "Reimbursable Expenses") and nothing else is recorded to that account.
Bonus: The Hybrid Method
Sometimes, we see a variation of method 2 where the expense and the reimbursement are shown as separate line items, but both are kept in the expense section. For example:
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Repairs and Maintenance: $5,000
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Less: Owner Recoup: ($1,000)
This provides the detail but maintains visual separation from income. It’s not perfect, but it’s tidy and avoids some of the pitfalls of method 2.
Key Considerations
Whichever method you use, keep two goals in mind:
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Make it easy to reconcile money in and money out.
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Avoid confusion in future budgeting cycles.
Of all the methods, balance sheet treatment stands out as the most technically accurate and tidy—but there is room for flexibility, particularly when it comes to reporting clarity.
Quick Takes:
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Balance sheet treatment is technically correct and cleanest.
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If using income/expense lines, keep reimbursements clearly separate.
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Avoid distorting next year’s budget by letting reimbursed costs inflate this year’s expenses.
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Always ensure reimbursements can be easily matched to the original expense.
If you require assistance in regards recording owner reimbursements in your software, please reach out to our admin team.
Links:
- Optimising Your Strata Chart of Accounts
- The Strata's Financial Layout Is Just Fine
The above content is of a general nature and should not be relied upon as professional advice. Ascend encourages readers to seek advice from suitably qualified professionals in relation to their specific circumstances and not to rely solely on the information provided above. Please contact our office for more information.
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