Accounting for Reimbursements: Journal Entries and Treatment
Expense reimbursements are payments made by employers to employees for business-related costs paid personally. Proper accounting ensures expenses are recognized in the correct period and comply with tax regulations.
Types of Reimbursements
- Out-of-pocket expenses: Travel, meals, supplies
- POV (Personally Owned Vehicle) mileage: Business miles driven personally
- Per diem: Daily allowances for travel
- Corporate card settlements: Card payments reconciled monthly
Cash Basis vs Accrual Basis Treatment
Under cash basis, reimbursement is recorded when paid. Under accrual basis, the expense is recorded when incurred, with a liability for amounts owed to employees.
Journal Entry: Employee Submits Expense Report
When an employee submits an expense report for reimbursement:
| Account | Debit | Credit |
|---|---|---|
| Travel Expense (or relevant expense) | XXX | |
| Accounts Payable / Employee Reimbursement Payable | XXX |
Journal Entry: Reimbursement Payment
When the company pays the reimbursement:
| Account | Debit | Credit |
|---|---|---|
| Accounts Payable / Employee Reimbursement Payable | XXX | |
| Cash / Bank | XXX |
Corporate Credit Card Reconciliation
When employees use corporate cards:
| Account | Debit | Credit |
|---|---|---|
| Office Supplies / Travel / Meals | XXX | |
| Corporate Card Payable | XXX |
When card is paid:
| Account | Debit | Credit |
|---|---|---|
| Corporate Card Payable | XXX | |
| Cash / Bank | XXX |
POV Mileage Reimbursement
IRS standard mileage rate (2026): 70 cents per mile for business use.
| Account | Debit | Credit |
|---|---|---|
| Mileage Expense (70¢ × miles) | XXX | |
| Cash / Employee Reimbursement Payable | XXX |
Practical Examples
Example 1: Employee Travel Reimbursement
An employee travels to a client meeting and spends $350 on airfare, $200 on hotel, and $75 on meals. They submit an expense report.
| Account | Debit | Credit |
|---|---|---|
| Travel Expense | $625 | |
| Employee Reimbursement Payable | $625 |
When paid:
| Account | Debit | Credit |
|---|---|---|
| Employee Reimbursement Payable | $625 | |
| Cash / Bank | $625 |
Example 2: POV Mileage
An employee drives 500 business miles in a month. At $0.70/mile, the reimbursement is $350.
| Account | Debit | Credit |
|---|---|---|
| Mileage Expense | $350 | |
| Employee Reimbursement Payable | $350 |
Example 3: Corporate Card Settlement
An employee uses the corporate card for $1,200 of office supplies. At month-end, before payment to card issuer:
| Account | Debit | Credit |
|---|---|---|
| Office Supplies Expense | $1,200 | |
| Corporate Card Payable | $1,200 |
Tax Implications
- Accountable plan: Reimbursements under an accountable plan are not taxable to employees
- Non-accountable plan: Reimbursements added to W-2 are taxable income
- Documentation required: Receipts, mileage logs, business purpose
Internal Controls
- Require itemized receipts for expenses over $25
- Approve expenses by manager separate from requestor
- Reconcile corporate cards monthly
- Set spending policies and limits
