Expert: Arthur Naman - 5/13/2009

Question
I would like to know if there is a way to expense lost time -- time spent rendering a service which doesn't result in compensation. And I'm referring to some type of expense beyond the income offset of 'bad debt' or 'uncollectable receivables'. As an example; a therapist gives the service of a one hour session to a client and ultimately doesn't get paid due to insurance maximums, etc. How do I claim that loss of time that could have been spent with another client for which I would have been paid. My only thought has been 'other expense' except that I was taught that was to be used for 'non-operating' expenses only AND what would the offsetting account be??? Please help!

Answer
"Lost time" is not really an expense per se. Rather it is simply an offset to gross income if you are on the accrual basis. By that I mean, if you record your income as your normal billing rate, then there should be an account setup for "uncollected fees" or "fee discounts" or similar.

if you have setup a receivable for fees and if those fees are not collected, then an account "bad debt" should be setup. Then reduce A/R with the offsetting entry to the bad debt account.

If you are on the cash basis, then gross income is simply actual cash received ans is recorded at the time payment is received.