What Is an Expense Report and Why Is It Needed

Expense Report

An expense report is a document that lists all expenses related to the operation of a business. Small businesses may request employees to complete expense reports in order to reimburse them for business-related expenses such as meals or gas. A small business owner may use expense reports for tracking project spending and organizing tax time.

What is an Expense Report?

An expense report is a document that records business spending. According to Entrepreneur, an expense report includes all purchases necessary for running a business such as gas, parking, meals, and hotels.

You can prepare an expense report using accounting software, or a template in Word Excel PDF, Word, Excel, and other popular programs.

What an Expense Report Looks Like

An expense report usually has columns like:

  • Date: The date that the item was purchased.
  • Vendor: Where the item was bought
  • Client: Who was the client who purchased the item?
  • Project: What project was the item purchased for?
  • Account: Instead of using client or project fields, you can use an account number
  • Author: Who purchased the item?
  • Notes: Additional clarifying notes
  • Amount: Total cost of the expense, including taxes

Here is an example of an expense report. This report shows expenses based on tax categories such as rent. The subtotal for each category is followed by the grand total. You can create an expense report based on a date range and export it to Excel. Or print it.

Expense Tracking Software from FreshBooks makes tax preparation, billing clients for expenses, and tracking project spending simple.

Also read: Analytical Report – What Is It and How to Write It

What is an Expense Report Used For?

Employers in small businesses that often have to pay out of pocket for business expenses must submit expense reports.

All reimbursable expenses will be listed in the employee’s expense record. The employee should attach receipts to their expense report. The owner can then check the expense report and reimburse the employee.

Small business owners can use expense reports to view their total expenses for a specific reporting period, usually a month or quarter. Accounting software allows the owner to see whether total expenses were higher or lower than expected, and then analyze the results.

Business Expense Categories

Small businesses also need expense reports to track taxes. A company can write off many business expenses. This article covers the most common deductible expenses for freelancers and sole proprietors.

According to the IRS, business expenses are travel expenses, rent, insurance, and interest on business loans.

An expense report can be used to help you or your accountant add up all expenses and then input them into tax forms. There are standard categories that the IRS uses in its forms. You enter your total expenses per category.

For example, A sole proprietor might use ScheduleC to supplement their personal tax return. They would enter $1000 if they had $1000 worth of advertising expenses.

In your expense reports, it is crucial to include the IRS’s categories. This will make it easier to complete your taxes quicker.

The following categories are included in Schedule C:

  • Advertising
  • Truck and car expenses
  • Commissions and fees
  • Contract labor
  • Benefits programs for employees
  • Insurance
  • Interest
  • Hypothec Mortgage
  • Professional and legal services
  • Office expenses
  • Pensions and profit-sharing plans
  • Lease or rent
  • Maintenance and repairs
  • Licenses and taxes
  • Travel and dining
  • Utilities
  • Wages

People often ask:

  • What is a Monthly Expense report?
  • What is considered an expense?
  • Expense Report Templates

What is a Monthly Expense Report?

Expense reports can be generated on a monthly basis, quarterly, or annually. A monthly expense report lists all purchases made by a company during a given month. This is essential for running a business.

An expense report for the year is used to deduct expenses from a company’s taxes. A monthly expense report can also be used to check if a company is staying within its budget. A monthly expense report is useful in times of financial difficulties to see how costs can be reduced or eliminated to increase profit.

Employees can submit a monthly expense report that tracks all business purchases for the month. Attach the required receipts.

The boss can then examine the report and determine if it is accurate and legitimate. If they have paid out of pocket, the boss can either reimburse the employee or use the report as a tracking tool for project spending. Business Dictionary

This article contains a step–by–step guide to help small businesses create expense reports, whether they are monthly or annual.

Also read: 10 Best Invoicing Software for Small Businesses

What is Considered an Expense?

An expense refers to money that a company, or self-employed person, spends on running a business or conducting a trade to try and make a profit.

They can be used to pay for travel expenses, wages, or rent. This can also include a decrease in assets (items’ own) depreciation.

For example, A company vehicle may lose value, and this can be considered an expense.

Finally, earnings deducted are considered expenses.

For example, A bad debt, which is money a company can’t collect on a client, is one example of an expense.

All expenses are costs. Not all expenses are costs.

For example,  A soap-making company might purchase new equipment to cook with. It isn’t an expenditure because it was purchased to generate more income.

The income statement of a company summarizes expenses and can be itemized on an expense report, According to Business Dictionary. This article examines the typical expenses that small businesses have.

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