What Is an Expense Statement and How Do You Make One?

An expense statement is a detailed record of costs incurred by an individual or organization, serving as a fundamental tool in financial management. These statements track expenditures, facilitate reimbursement processes, and aid in budgeting and accurate financial record-keeping. They are widely used in various settings, from businesses requiring employees to report out-of-pocket costs for reimbursement, to individuals managing personal budgets and tracking deductible expenses for tax purposes.

What is an Expense Statement

An expense statement, often called an expense report, is a comprehensive document that itemizes all expenditures over a specific period. It provides a clear, verifiable account of where money has been spent, typically for business activities or project-specific costs. For businesses, these statements are essential for monitoring financial outflows, ensuring compliance with internal policies, and validating claims for reimbursement. They also help identify cost-saving opportunities and improve financial health.

Key Components of an Expense Statement

An expense statement typically includes specific information to ensure clarity and accuracy. Each entry details the date the expense was incurred, providing a chronological record of spending. It identifies the vendor, the exact amount of the expense, including any taxes, and categorizes the expenditure into relevant groups such as travel or office supplies. A clear purpose or description of the expense explains the business reason for the transaction.

Supporting documentation, such as receipts or invoices, must accompany the statement to verify each expenditure. The Internal Revenue Service (IRS) generally requires receipts for business expenses exceeding $75 and recommends keeping clear records for all expenses to substantiate deductions. These records should include the amount, date, payee, and business purpose.

How to Prepare an Expense Statement

Preparing an expense statement involves compiling necessary information and documentation. This process can be done manually using spreadsheets, or through dedicated expense tracking software and mobile applications that automate parts of the process. Organizing receipts and other supporting documents is a continuous task throughout the period, ideally by scanning them or storing them digitally to prevent loss and streamline compilation.

When transferring information to the statement, accuracy and completeness are paramount to avoid discrepancies and ensure accounting. Match the details on the statement with those on the receipts, including the expense type, date, amount, and vendor. Before finalizing, a thorough review of all entries is recommended to correct errors or omissions, ensuring the statement is ready for submission.

Submission and Review Process

Once an expense statement is prepared, it enters a submission and review process. Submission methods vary by organization, often involving online portals, email, or physical submission to a designated department or individual. The statement is first submitted to a direct manager for initial approval, verifying that expenses align with company policy and are legitimate.

Following managerial approval, the statement moves to the accounting or finance department for a detailed review. This review ensures adherence to company policies, proper documentation, and compliance with financial and tax rules. After a successful review, the statement is approved, and if applicable, reimbursement is processed, usually within a few business days to a couple of weeks, depending on processing times. If discrepancies are found, the statement may be returned to the submitter for clarification or correction.