Refunds in expense categories

I recently was refunded a remaining amount of a legal retainer. I deposited a check and tagged it to Legal - an expense category. Looking at my monthly analysis sheet - I noticed that it was -$1,000! I found some other posts here about how any transaction posted to an expense account will be considered negative - but that doesn’t make any sense because sometimes you get refunds. I also get a reimbursement from my company towards Internet service that I tag as Utilities - also an expense. But it’s not as obvious to see if that is being subtracted instead of added. The mistake with the legal refund stood out because I’ve had no other legal expenses this year.

Any ideas on how to make sure that a positive transaction in an expense category stays positive?


Hi @beatles ,
There are different ways to look at this, but I would consider the -1,000 expense as the correct way to do it.

At some point, you had a legal expense for the legal retainer. Say that was 3,000. That would appear as a 3,000 expense. But then you get a refund for 1,000. (The negative 1,000). You would have a legal expense of 2,000 (3000 - 1000).

If the rebate was a positive number, you would make your legal expenses more than they really are.

One other way to handle it, would be keep the Legal expenses as an expense. Then you could have a Legal Refunds income category. You would categorize the refund as a refund and a positive number, since the transaction likely increased your checking balance.

To get your legal expense total, you would need to add the income and expense accounts. But this way would give you a total for both the expenses and the refunds.

I’d recommend the first approach with just one category though.


1 Like