I agree with Smithco's method in general. Enter the receipt as an expense under the vendor name (Lowe's, Staples, etc) track to expense, HST and project as appropriate. Show as paid by a "dummy" bank account - Employee Purchases.

Since payroll is outsourced, none of the discussion about linking and deduction accounts apply to you. Your payroll should be entered as a general journal entry and the amount of the reimbursements made to the employees will post to the new account "Employee Purchases." After each payroll entry, or once a month you could then reconcile this "bank" account ensuring that all entries have been recorded and employees paid out correctly.

You are already tracking what is due to the employee when you add up the receipts and provide that number to the payroll company.

I agree with Smithco's method in general. Enter the receipt as an expense under the vendor name (Lowe's, Staples, etc) track to expense, HST and project as appropriate. Show as paid by a "dummy" bank account - Employee Purchases.

Since payroll is outsourced, none of the discussion about linking and deduction accounts apply to you. Your payroll should be entered as a general journal entry and the amount of the reimbursements made to the employees will post to the new account "Employee Purchases." After each payroll entry, or once a month you could then reconcile this "bank" account ensuring that all entries have been recorded and employees paid out correctly.

You are already tracking what is due to the employee when you add up the receipts and provide that number to the payroll company.

And I presume the 'employee purchases' bank accounts would have departments (one for each employee to be reimbursed) assigned to it ?

No departments or projects necessary. To assign to each employee would be unnecessary extra work. As long as you have the copies of invoices that have not been reimbursed to employees along with the G/L printout then it is easy to reconcile.

Example Homes Depot would show 40.25 as a credit in employee purchase payable with the name 'Home Depot' and Roger, Jolly thru payroll deduction would show an exact amount of 40.25 as a debit to employee purchase payable with the name Roger, Jolly - it is just a matter of crossing one off against the other. As long as one is diligent in reimbursing in a timely manner then there should be very little overlap from one month to the next. There may be times where there are more than one invoice being reimbursed to employee but if you stay on top of it then it is easy to reconcile.

The employee reimbursement account can be set up for reconciliation,

I've found that tagging matching pairs of transactions as 'cleared' helps separate the wheat from the chaff, especially when collecting $20 from each employee for a baby gift, and buying gifts at 3 stores on a company credit card.

oh - great idea, never thought of that - lol.