Expense Reports
Complete flow for employee expense reports - from creation to reimbursement.
Expense Report Flow
COMPLETE EXPENSE REPORT FLOW
═══════════════════════════════════════════════════════════════════════════════
┌─────────────────────────────────────────────────────────────────────────────┐
│ STEP 1: EMPLOYEE CREATES EXPENSE REPORT │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ Employee Record: │
│ • Name: John Smith │
│ • Supervisor: Jane Manager │
│ │
│ Expense Report: │
│ ┌──────────────────────────────────────────────────────────────────────┐ │
│ │ Date │ Category │ Description │ Amount │ │
│ ├─────────────┼───────────────┼───────────────────────┼────────────────┤ │
│ │ Dec 10 │ Travel │ Flight to client │ $450.00 │ │
│ │ Dec 10-12 │ Lodging │ Hotel (3 nights) │ $600.00 │ │
│ │ Dec 10-12 │ Meals │ Business meals │ $150.00 │ │
│ │ Dec 12 │ Transport │ Taxi/Uber │ $80.00 │ │
│ ├─────────────┴───────────────┴───────────────────────┼────────────────┤ │
│ │ TOTAL: │ $1,280.00 │ │
│ └─────────────────────────────────────────────────────┴────────────────┘ │
│ │
│ Status: Pending Submission │
│ GL Impact: None (not yet submitted) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
│
▼
┌─────────────────────────────────────────────────────────────────────────────┐
│ STEP 2: SUBMIT FOR APPROVAL │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ Employee clicks "Submit" │
│ • Report sent to supervisor (Jane Manager) │
│ • Status changes to: Pending Approval │
│ │
│ GL Impact: None (approval required) │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
│
┌───────────────┴───────────────┐
│ │
▼ ▼
┌─────────────────────────────────┐ ┌─────────────────────────────────┐
│ STEP 3A: APPROVED │ │ STEP 3B: REJECTED │
├─────────────────────────────────┤ ├─────────────────────────────────┤
│ │ │ │
│ Supervisor approves report │ │ Supervisor rejects report │
│ │ │ • Employee notified │
│ Status: Approved for Payment │ │ • Can edit and resubmit │
│ │ │ │
│ ┌─────────────────────────────┐ │ │ Status: Rejected │
│ │ GL IMPACT AT APPROVAL: │ │ │ │
│ │ │ │ │ GL Impact: None │
│ │ Dr. Travel Expense $450 │ │ │ │
│ │ Dr. Lodging Expense $600 │ │ │ │
│ │ Dr. Meals Expense $150 │ │ │ │
│ │ Dr. Transport Expense $80 │ │ │ │
│ │ Cr. A/P Employee $1,280 │ │ │ │
│ └─────────────────────────────┘ │ │ │
│ │ │ │
└─────────────────┬───────────────┘ └─────────────────────────────────┘
│
▼
┌─────────────────────────────────────────────────────────────────────────────┐
│ STEP 4: PAYMENT (Bill Payment or Direct Deposit) │
├─────────────────────────────────────────────────────────────────────────────┤
│ │
│ Finance processes payment to employee │
│ │
│ ┌─────────────────────────────┐ │
│ │ GL IMPACT AT PAYMENT: │ │
│ │ │ │
│ │ Dr. A/P Employee $1,280 │ │
│ │ Cr. Bank/Cash $1,280 │ │
│ └─────────────────────────────┘ │
│ │
│ Status: Paid in Full │
│ │
└─────────────────────────────────────────────────────────────────────────────┘
Expense Types
Standard Expense Categories
| Category | Typical Account | Description |
|---|---|---|
| Travel - Airfare | 6310 Travel Expense | Flights, train tickets |
| Travel - Lodging | 6320 Lodging Expense | Hotels, accommodations |
| Travel - Meals | 6330 Meals Expense | Business meals |
| Travel - Transport | 6340 Transport Expense | Taxi, Uber, rental cars |
| Office Supplies | 6410 Office Supplies | General supplies |
| Professional Development | 6510 Training Expense | Conferences, courses |
| Client Entertainment | 6610 Entertainment | Client meals, events |
Corporate Card vs. Out-of-Pocket
EXPENSE PAYMENT TYPES
═══════════════════════════════════════════════════════════════════════════════
OUT-OF-POCKET (Employee Paid):
─────────────────────────────────────────────────────────────────────────────
Employee pays with personal funds
Company reimburses through expense report
GL at Approval:
Dr. Expense Account $XXX
Cr. A/P - Employee $XXX
GL at Payment:
Dr. A/P - Employee $XXX
Cr. Bank $XXX
CORPORATE CARD (Company Paid):
─────────────────────────────────────────────────────────────────────────────
Employee uses company credit card
No reimbursement needed (already paid by company card)
GL at Card Statement:
Dr. Credit Card Clearing $XXX
Cr. Credit Card Payable $XXX
GL at Expense Report Approval:
Dr. Expense Account $XXX
Cr. Credit Card Clearing $XXX
Note: A/P Employee NOT used for corporate card expenses
GL Journal Entries
Example 1: Out-of-Pocket Expense Report
Employee pays with personal funds, company reimburses.
SCENARIO: Out-of-Pocket Business Trip
═══════════════════════════════════════════════════════════════════════════════
Employee: John Smith
Trip: Client meeting in Jakarta (Dec 10-12, 2024)
Expenses Submitted:
- Flight (personal card): $450.00
- Hotel 3 nights: $600.00
- Business meals: $150.00
- Taxi/Grab: $80.00
─────────────────────────────────────
TOTAL: $1,280.00
Step 1: At Approval (GL Posts)
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 6310 Travel Expense - Airfare │ $450.00 │ │
│ 6320 Travel Expense - Lodging │ $600.00 │ │
│ 6330 Travel Expense - Meals │ $150.00 │ │
│ 6340 Travel Expense - Transport │ $80.00 │ │
│ 2100 A/P - Employee │ │ $1,280.00 │
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $1,280.00 │ $1,280.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Expenses recognized on Income Statement
- Liability created (company owes John $1,280)
Step 2: At Payment (GL Posts)
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 2100 A/P - Employee │ $1,280.00 │ │
│ 1000 Bank Account │ │ $1,280.00 │
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $1,280.00 │ $1,280.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Liability cleared (John paid)
- Cash reduced (money transferred to John)
Example 2: Corporate Card Expense Report
Employee uses company credit card - no reimbursement needed.
SCENARIO: Corporate Card Business Trip
═══════════════════════════════════════════════════════════════════════════════
Employee: Sarah Lee
Trip: Training conference (Dec 15-17, 2024)
Expenses on Corporate Card:
- Conference registration: $500.00
- Hotel 2 nights: $400.00
- Meals: $100.00
─────────────────────────────────────
TOTAL: $1,000.00
Step 1: Credit Card Statement Received (before expense report)
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 1150 Credit Card Clearing │ $1,000.00 │ │
│ 2200 Credit Card Payable │ │ $1,000.00 │
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $1,000.00 │ $1,000.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Charges sitting in clearing account (unclassified)
- Credit card liability recorded
Step 2: Expense Report Approved (GL Posts)
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 6510 Training & Conference │ $500.00 │ │
│ 6320 Travel Expense - Lodging │ $400.00 │ │
│ 6330 Travel Expense - Meals │ $100.00 │ │
│ 1150 Credit Card Clearing │ │ $1,000.00 │
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $1,000.00 │ $1,000.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Expenses properly classified to expense accounts
- Clearing account zeroed out
- NO A/P Employee (nothing owed to Sarah)
Step 3: Credit Card Payment (separate process)
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 2200 Credit Card Payable │ $1,000.00 │ │
│ 1000 Bank Account │ │ $1,000.00 │
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $1,000.00 │ $1,000.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Credit card paid
- Bank reduced
Example 3: Mixed Expense Report (Partial Corporate Card)
Some expenses on corporate card, some out-of-pocket.
SCENARIO: Mixed Payment Expense Report
═══════════════════════════════════════════════════════════════════════════════
Employee: Mike Wong
Trip: Client visit (Dec 20-21, 2024)
Corporate Card:
- Flight: $350.00
- Hotel: $200.00
─────────────────────────────
Subtotal Corporate: $550.00
Out-of-Pocket (Personal):
- Client dinner: $150.00
- Taxi (no receipt): $50.00
─────────────────────────────
Subtotal Personal: $200.00
TOTAL REPORT: $750.00
At Expense Report Approval:
┌────────────────────────────────────┬────────────┬────────────┐
│ Account │ Debit │ Credit │
├────────────────────────────────────┼────────────┼────────────┤
│ 6310 Travel Expense - Airfare │ $350.00 │ │
│ 6320 Travel Expense - Lodging │ $200.00 │ │
│ 6610 Client Entertainment │ $150.00 │ │
│ 6340 Travel Expense - Transport │ $50.00 │ │
│ 1150 Credit Card Clearing │ │ $550.00 │ ← Corp card
│ 2100 A/P - Employee │ │ $200.00 │ ← Owe Mike
├────────────────────────────────────┼────────────┼────────────┤
│ TOTAL │ $750.00 │ $750.00 │
└────────────────────────────────────┴────────────┴────────────┘
Effect:
- Mike only gets reimbursed $200 (out-of-pocket portion)
- Corporate card portion clears through Credit Card Payable separately
GL Summary by Expense Type
| Expense Payment Type | Liability Account | Cleared By |
|---|---|---|
| Out-of-Pocket | A/P - Employee | Bill Payment to Employee |
| Corporate Card | Credit Card Payable | Credit Card Payment |
| Petty Cash | Petty Cash | Petty Cash Replenishment |
Expense Report Status Flow
STATUS LIFECYCLE
═══════════════════════════════════════════════════════════════════════════════
┌──────────────────┐
│ In Progress │ ← Employee creating/editing
└────────┬─────────┘
│ Submit
▼
┌──────────────────┐
│ Pending Approval │ ← Waiting for supervisor
└────────┬─────────┘
│
┌────┴────┐
│ │
▼ ▼
┌────────┐ ┌──────────────────┐
│Rejected│ │ Approved for │ ← GL Posted
│ │ │ Payment │
└───┬────┘ └────────┬─────────┘
│ │ Payment Processed
│ ▼
│ ┌──────────────────┐
│ │ Paid in Full │ ← Payment GL Posted
│ └──────────────────┘
│
▼
┌──────────────────┐
│ In Progress │ ← Can resubmit
└──────────────────┘
Approval Workflow
Standard Approval Path
APPROVAL HIERARCHY
═══════════════════════════════════════════════════════════════════════════════
Amount-Based Routing
│
┌─────────────────┼─────────────────┐
│ │ │
▼ ▼ ▼
< $500 $500-$5000 > $5000
│ │ │
▼ ▼ ▼
┌──────────────┐ ┌──────────────┐ ┌──────────────┐
│ Direct │ │ Manager │ │ Manager + │
│ Supervisor │ │ Approval │ │ Finance │
│ Only │ │ │ │ Director │
└──────────────┘ └──────────────┘ └──────────────┘
Multi-Level Approval Example
| Expense Amount | Approval Required |
|---|---|
| $0 - $500 | Direct Supervisor |
| $501 - $2,000 | Supervisor + Department Manager |
| $2,001 - $5,000 | Department Manager + Finance Manager |
| > $5,000 | Finance Director + CFO |
Accounts Summary
Balance Sheet Accounts
| Account | Type | Used For |
|---|---|---|
| A/P - Employee | Liability | Owed to employee (out-of-pocket) |
| Credit Card Payable | Liability | Corporate card balance |
| Credit Card Clearing | Asset | Reconcile card to expense |
| Bank/Cash | Asset | Payment to employee |
Income Statement Accounts
| Account | Type | Used For |
|---|---|---|
| Travel Expense | Expense | Travel-related costs |
| Meals & Entertainment | Expense | Business meals, client events |
| Office Supplies | Expense | General supplies |
| Professional Dev | Expense | Training, conferences |
Best Practices
For Employees
| Practice | Benefit |
|---|---|
| Submit timely | Faster reimbursement |
| Attach receipts | Audit compliance |
| Use correct categories | Accurate reporting |
| Add business purpose | Justifies expense |
For Approvers
| Practice | Benefit |
|---|---|
| Review within 3 days | Employee satisfaction |
| Verify receipts match | Compliance |
| Check policy compliance | Prevent fraud |
| Add notes if rejecting | Clear communication |
Common Issues
| Issue | Cause | Solution |
|---|---|---|
| Report stuck in approval | Approver unavailable | Set up approval delegation |
| Wrong expense account | Category miscoded | Review before approval |
| Missing receipts | Employee didn't attach | Reject with note to add |
| Duplicate submission | Same expense twice | Review dates/amounts carefully |
Related Topics
- Bank Flow - For payment processing
- GL Flow Map - See expense report in GL context