What Is an Expense Report?

An expense report is a list of business costs that someone paid on the business's behalf, such as an employee paying with their own money or a company card, submitted so the business can check them, pay back what's owed and record them in its books. Each line shows what was bought, when, from whom, for how much and why, with the receipt. This page follows one report from submission to the books: what happens to it, how it's recorded, and what to keep.

Billed publishes this page. The accounting definitions are quoted from OpenStax, Principles of Accounting, Volume 1 (Rice University), and the record rules from the IRS (US), opened on October 30, 2026. Your expense policy and your accountant set the details for your business.

What Happens to an Expense Report

1. Submitted: the person who paid lists each cost with its receipt, for a month or for a single trip.
2. Reviewed: a manager or the owner checks each line against the expense policy and the receipts, and takes off anything personal or outside the policy.
3. Approved: the approved total is what the business owes back.
4. Paid back: the business reimburses the approved amount, or settles it against an advance.
5. Recorded: each approved line goes into the books under its expense category.
6. Kept: the report and its receipts are filed with the business's records.

The rules for steps 2 to 4, such as deadlines, limits and what needs a receipt, belong in your expense policy. For setting up reimbursement, see how to set up expense reimbursement and the guide to reimbursement policies, which covers the US accountable-plan rules.

What Goes on the Report

Each line needs the date, who was paid, the amount, the category, the business purpose and the receipt. For the different kinds of expense report (travel, mileage, advance settlement and others) and a step-by-step way to prepare one, see types of expense reports.

In the US, the IRS what kind of records should I keep page says: "Your supporting documents should identify the payee, the amount paid, proof of payment, the date incurred, and include a description of the item purchased or service received that shows the amount was for a business expense." It adds: "If you deduct travel, gift or transportation expenses, you must be able to prove (substantiate) certain elements of expenses." Ask your accountant which rules apply to you.

How an Approved Report Is Recorded

An expense, in OpenStax's section 2.1 definition, is "a cost associated with providing goods or services to customers". Each approved line is recorded under its expense category, such as meals, travel or supplies, so the costs show up in the right place on the income statement. See business expense categories and what is an expense account.

Timing matters under accrual accounting. OpenStax's chapter 3 key terms describe the expense recognition principle, which "matches expenses with associated revenues in the period in which the revenues were generated". If a report is approved at the end of one month and paid in the next, the costs belong to the month they were incurred. Until it's paid, the business owes the employee the approved amount. OpenStax's chapter 4 key terms define an accrued expense as an "expense incurred in a period but not yet recorded, and no money has been paid". For the method itself, see what is accrual accounting. Ask your accountant which accounts to use.

Worked Example: One Month's Report, From Approval to the Books (sample figures)

The employee, costs and dates here are a sample, invented for this example. It shows bookkeeping only, not tax.

A salesperson submits a May expense report:

• May 6, client lunch: $86.40 (meals)
• May 6, parking at the client's office: $24.00 (travel)
• May 14, train to a trade show: $57.50 (travel)
• May 14, presentation clicker: $29.99 (supplies)
• May 14, a personal coffee bought on the same card: $4.75

The manager takes off the personal coffee and approves the rest on May 31:

• Approved total: $86.40 + $24.00 + $57.50 + $29.99 = $197.89
• By category: meals $86.40; travel $24.00 + $57.50 = $81.50; supplies $29.99
• Check: $86.40 + $81.50 + $29.99 = $197.89

The business pays the employee on June 5. In accrual books:

• May 31: debit meals expense $86.40, travel expense $81.50 and supplies expense $29.99; credit an amount owed to the employee, $197.89. The costs land in May, when they were incurred.
• June 5: debit the amount owed to the employee $197.89; credit cash $197.89. Nothing new is expensed in June.

Debits equal credits in both entries. If the salesperson had received an advance, the approved total would be settled against it instead; types of expense reports has a sample of that.

Where Billed Fits

Billed's expense and receipt tracking page says "An expense in Billed records who you paid, when, how much and which category it belongs to, with the receipt attached to the same entry." It also says "Billed's expense report can group your expenses by category." For keeping expense records month to month, see expense tracking for small business.

When This Guide Isn't for You

If your business reimburses employees in the US, how the reimbursement is treated for tax depends on whether you have an accountable plan; the guide to reimbursement policies quotes the IRS rules. If you use cash-basis books, the timing in the example differs. Ask your accountant in both cases.

Related Guides

• Types of Expense Reports
• Expense Tracking for Small Business
• How to Create an Expense Policy
• Guide to Employee Reimbursement Policies
• Expense Account in Business
• What Is Accounts Payable?

Frequently Asked Questions

What should be included in a business expense report?

For each cost: the date, who was paid, the amount, the category, the business purpose and the receipt. Your expense policy may ask for more, such as a client or project name.

What happens after an expense report is submitted?

Someone reviews each line against the policy and the receipts, takes off anything personal, and approves the rest. The business then pays back the approved amount and records each line under its expense category.

When is an expense report recorded in the books?

In accrual books, the costs belong to the period they were incurred, even if the employee is paid back later. In the sample on this page, a report approved on May 31 is recorded as May expenses, and the June 5 payment only settles what the business owed.

What is the difference between an expense report and an invoice?

An expense report is an internal document listing costs someone paid on the business's behalf, so they can be paid back and recorded. An invoice is sent by a seller to a customer to ask for payment for goods or services.