An Expense Report is usually a list that a business creates to outline all the expenses incurred over a specified period. It can also be for a specific employee, especially to reimburse them for business-related purchases such as gas or meals. The main report though is usually for the whole company to track business spending. This report needs to include any purchase made in that period using either an accounting software, such as QuickBooks Online or a template in Word or Excel.
Within the expense report the typical columns are date (for the date that the expense happened), vendor (where and with who did the expense occur), client (if the item was purchased for someone specific), account number (if it relates to an account in the company Chart of Accounts) amount (total amount for the purchase), notes and description of the purchase. This information is needed to outline the nature of the expense and why it occurred for the business.
With an expense report that relates to the business as a whole in a specific period (month, quarter or tax year) the owner can analyze the report and compare it to past reports or also expense expectations for that period. Another benefit of keeping an expense report is that certain expenses can be deducted for taxes which lowers the amount of money a business is required to pay to the Canadian Revenue Agency. With a report, the owner or accountant can easily add up the expenses that are deductible and add that to the tax report. This is usually done with a yearly expense report, whereas a monthly and quarterly one helps with analyzing and setting expectations for future periods. The monthly report allows the business owner to see if the money is being spent efficiently and if there are any costs that could be reduced or eliminated to increase the business profit.
If the expense report is used to reimburse an employee a similar layout is used for all the reimbursable expenses and receipts are usually attached to the expense report as proof of the purchase. This allows the owner to review the report for accuracy and then pay the requested amount. This payment is then subsequently recorded as a business expense as well. By following this method, it is easier for the company to manage the day to day transactions with the employees using their personal money and receiving a reimbursement rather than all the employees relying on the owner’s card or cash or having the owner issue multiple business credit cards which can be expensive and very difficult to manage. The expense report is needed though for the owner to approve the legitimacy of the expenses and that the nature of them complies with the business policies regarding reimbursable expenses.
Expense Reports are another form of record keeping and can provide more information on transactions if the CRA requires any clarification on the information provided in the company’s tax return. The receipts that are also included in the expense reports act as supporting documentation for those expense transactions which is necessary for all business transactions.