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How Do I Deal With Employee Expenses?

There are several ways to deal with these and it really depends on how many there are to deal with at any one time.

  1. Analyse the individual expense sheet and summarise by account code – Nett and VAT. Then post the expenses direct through the cash book as a multi line payment – care will need to be taken to code or calculate the VAT correctly as you could end up with a difference. This does not take into account the fact that the expenses will probably relate to a previous period and should be accrued for.
  2. Create a supplier account for each employee for their expenses – or one single account called Expenses. Post each person’s expenses as one batch again taking care with the VAT and debiting the account with the payment ( possibly in the following Accounting Period) for example – an expense sheet covering March is completed and delivered to accounts on 5th April for payment. The purchase ledger is still open for March Invoices so the expenses are posted to March and the payment entered in the cash book in April – this is the easiest treatment and avoids accruals.
  3. Summarise all the expenses for the month – if all relate to the month – on a spreadsheet and post the totals to the purchase ledger. The payments will also be posted to the purchase ledger account individually or in bulk.
  4. The entries can be done by journal but the value of inputs will not get picked up – so the VAT return will need to be adjusted – more difficult under MTD. If done by journal, create an expenses control account to post the total to and the payments when made.