Travel Expense Entry: Navigating The Qbo Way

Keeping track of travel expenses is essential for businesses to ensure they can make the most of their tax deductions. In QuickBooks Online (QBO), you can record travel expenses by creating a new account in your Chart of Accounts and selecting 'Expenses' as the Account Type. You can then create an Expense transaction, selecting the appropriate account, and entering the necessary details such as the payee's name and amount to be deducted. This allows you to have a comprehensive view of your travel expenses and ensure accurate record-keeping for tax purposes.

Creating a new expense account

To create a new expense account in QuickBooks Online (QBO), you can follow these steps:

• Go to the Accounting menu.
• Select Chart of Accounts.
• Click the New button in the upper right-hand corner.
• In the Account Type drop-down menu, select Expenses.
• Under Detail Type, choose Travel.
• Give your new account a Name.
• Click the Is sub-account box and select the parent account if you're adding a subaccount.
• Select Save and Close.

Once you've created your new expense account, you can start adding expenses. To do this, click the Plus icon, then click Expense under Vendors. Enter the payee's name, the account details, and the amount you need to deduct.

You can also create a new expense account by going to the Transactions tab and selecting Chart of Accounts. Then, click the New button and choose Expense in the Account Type section. Complete the necessary fields and click Save and Close.

Additionally, you can create a new expense category by going to Accounting on the left panel and selecting Chart of Accounts. Click New, then select the Expense icon and fill in the necessary information.

Adding sub-accounts

To add sub-accounts to your chart of accounts in QuickBooks, follow these steps:

Step 1:

Click the "Gear" icon and then select "Chart of Accounts".

Step 2:

Click "New" to create a new account.

Step 3:

Select "Expenses" from the "Account Type" drop-down menu.

Step 4:

Choose "Travel" from the "Detail Type" drop-down menu.

Step 5:

Name your new account.

Step 6:

Check the "Is sub-account" box and select the parent account.

Step 7:

Click "Save and Close".

Now, you can create an expense transaction and select the appropriate account to get a complete picture of your travel expenses.

Additionally, you can use the "Tags" feature to track entries. To enable this feature, go to the "Gear" icon, choose "Account and Settings", select the "Sales" tab, and turn on "Tags". Then, go to the "Expenses" tab and turn on the "Show Tags field on expense and purchase forms". Click "Save and Done".

Tracking mileage

Mileage tracking is a feature in QuickBooks® Online that makes it easier to keep records straight and help you get the tax deductions you need. You can enter trips manually or use the auto-tracking functionality. The latter uses your phone's GPS to automatically detect and measure your trips.

• Enter Vehicle Info: From the mobile app, navigate to Menu > Mileage > Auto-tracking > Manage vehicles to enter the info. You can also enter additional vehicle details (make, model, cost, ownership status) from your browser.
• Enable Auto-Tracking: Navigate to Menu > Mileage > Auto-tracking and turn the toggle switch on. You might need to open your smartphone’s settings to allow auto-tracking.
• Review Logged Trips: From the UNREVIEWED tab, swipe right to categorize a trip as Personal, or swipe left to categorize it as Business. If you categorize a trip as Business, QuickBooks will prompt you to add a purpose for the trip.
• Save Favourite Locations: If you frequently travel between a few destinations, save them to your list of Favourite Locations for quicker entry. You can choose from a suggested location name (Home, Work, etc.), or create your own custom location name.

If you prefer to log your trips manually, you can do so using the Add (+) button on the mobile app or the Add trip button on your browser. From there, you can add the trip date, distance, purpose, and start/end points. Once you save it, the trip will appear in the REVIEWED tab, alongside any automatically tracked trips.

Recorded trips are not captured by the QuickBooks Online Audit Log, and deductible trips are not recorded in your General Ledger as posted transactions. To record a mileage expense, you can either record a bill to reimburse the owner or create a journal entry. You’ll need to set up a Mileage expense account to categorize these entries.

Recording meal expenses

Step 1: Create Expense Accounts

Firstly, you need to set up two types of expense accounts in your Chart of Accounts. The first account, "Meals and Entertainment," is for entries reported on your tax form and subject to the 50% limitation. The second account is for meals that are not subject to the 50% limitation, such as coffee and food at the office or meals for employees.

Step 2: Record Expenses

Once your expense accounts are set up, you can record your meal expenses using either the detailed or simplified method.

The detailed method requires you to keep receipts and claim your expense using the actual amount spent. This ensures you get the exact deduction you are entitled to, but it is more time-consuming. To streamline this process, you can use a file folder to store your receipts or make all meal purchases with a dedicated credit card, which will provide a detailed list of transactions.

The simplified method allows you to claim a flat amount for each meal, but it is still advisable to keep your receipts in case of an audit.

Step 3: Record Transaction Details

After choosing your preferred method, you need to record the transaction details in QBO. There are two methods for this: the Journal Entry method and the Petty Cash Account Expense method.

Method 1: Journal Entry

• Click "Accounting" and then "Chart of Accounts" in the left-side menu.
• Search for the "Owner's Investment" account or a similar account for logging money you've invested personally into your business.
• Click "View Register" on the right-hand side.
• Click "Add Journal Entry."
• Fill in the transaction details:

• DATE: Date of the transaction
• REF NO. TYPE: Optional
• PAYEE ACCOUNT: Who was paid
• MEMO: Optional, used to note why the money was spent
• INCREASE/DECREASE: Amount of money added or removed from the account
• ACCOUNT: The payee account this falls under

Click "Save."

Method 2: Petty Cash Account Expense

• Click "Accounting" and then "Chart of Accounts" in the left-side menu.
• Click the "New" button.
• Create a "Petty Cash" account:

• Name: Petty Cash (or a name of your choice)
• Detail Type: Cash on hand
• Description: Optional

• Click "Save and Close."
• Click "View Register" for the Petty Cash account.
• Click "Add Check" on the left and then select "Expense" from the drop-down.
• Fill in the transaction details:

• DATE: Date of the transaction
• REF NO. TYPE: Optional
• PAYEE ACCOUNT: Who was paid
• PAYMENT: Amount spent
• ACCOUNT: The payee account this falls under

• Click "Save."
• After a chosen period (a month or a year), navigate to your Petty Cash account in the Bank Register.
• Click the "Add Expense" drop-down and select "Deposit."
• Enter "Owner's Investment" as the Deposit account.
• Ensure the deposit amount matches the Ending Balance of the account.
• Click "Save," and the Ending Balance should now be $0.00.

Advantages and Disadvantages of Each Method

The Journal Entry method is shorter and faster, but it is more challenging to find individual transactions. On the other hand, the Petty Cash Account Expense method makes it easier to find specific transactions and their details.

Reimbursing employees

When it comes to reimbursing employees for their travel expenses, you can either pay them on the day of the transaction or record the expense and pay them later. Here's a step-by-step guide on how to do this in QuickBooks Online (QBO):

Paying employees on the day of the transaction:

• Go to the "+ New" button and select "Cheque" or "Expense".
• From the "Payee" drop-down menu, locate and select the name of your employee.
• From the "Category" drop-down menu, select a liability account. If you don't have one set up yet, you can add a new account.
• Enter the other necessary information, such as the amount to be reimbursed.
• Click "Save" or "Save and Close".

Recording the expense first and paying later:

• Create a journal entry to record the expense for future payment.
• When you are ready to reimburse your employee, create a transfer by going to the "+ New" button and selecting "Transfer".
• From the "Transfer Funds From" drop-down menu, choose the bank account used to pay the employee.
• From the "Transfer Funds To" drop-down menu, select the liability account that you used to record the expense.
• Enter the amount reimbursed in the "Transfer Amount" field.
• Click "Save" or "Save and Close".

Additionally, when reimbursing employees for their travel expenses, it's important to decide whether you will implement an accountable or non-accountable plan. An accountable plan must follow IRS guidelines, which state that expenses must be for business purposes, adequately reported to the company in a reasonable time, and any excess reimbursement must be returned within a reasonable amount of time. Non-accountable plans are taxable, whereas accountable plans are not.

Frequently asked questions