How do I account for reimbursed expenses?

The way I would handle reimbursed expenses is, I would create an item for the reimbursed expenses and when creating the item I would choose the expense account that I want to record the reimbursement in as the bookkeeping account. That way when I add the item to the invoice, the "sale" of the item will be added to my expense account and not my income (revenue) account. The expense will actually reduce the expense accounts total for that period (the month that you invoice the client in).

EXAMPLE
So say you had to overnight something to your client using UPS or FedEx. You take the package to your UPS Store or FedEx Kinko's and mail the package. You come back to the office and record the expense, choosing the Shipping/Postage expense account. Then you could create a "Reimbursed Shipping/Postage" item on your Items List that points to your Shipping/Postage expense account that you recorded the original expense in, and you add the item to your invoice for the amount of of the original expense.

Effect on accounts: Your expense account was increased with you recorded the actual charge for shipping the package. And then the expense account is decreased by the amount you charged your client - so the net effect on the shipping expense account is 0.00 because you were reimbursed for those charges.

Note: If you charge a fee over and above the expense - like you add, say, 20% to all reimbursed expenses, you'll need to go back to the way you handled the charges before by booking them as revenue but instead of recording the original expense in your expense account, you'll want to record the cost in your Cost of Sales account. This way, the "expense" will automatically be subtracted from your Revenue on your Income Statement.