Handling and setting expense accounts

When you are starting a new business, there are many accounting issues to consider.It all depends on what type of business you operate what kind of accounts will be necessary.

Most businesses require an expense account to be set up.An expense account can be set up in two ways: you can have all of your outgoing expenses in one account or you can have just tax deductible expenses in your expense account.Which ever way you choose make sure that it works for your business.

The expense accounts discussed here are going to be under the assumption that it is the second kind of account, where it is just tax deductible expenses.But it is going to be even more specific, it will be an account that is used to reimburse employees for business expenses that they incur.

You can set up this account it two ways, it can be considered accountable or non-accountable.For the account to be accountable there has to be substantiation on all purchases made within the account.This can be accomplished with receipts from the purchases.If not, then it is non-accountable and the money that goes out is considered income for the employees it is given to.

It can be scary to think about giving out money to your employees for business expenses, how do you know that they really had all of those expenses and that they were all necessary.To protect your accounts and your business, you should have a policy in place.This makes sure that your employees know what will receive compensation and what will not.

Make sure that you are always keeping an eye on your expense account.You might consider having employees get permission before making a purchase that they are going to need to be reimbursed for.This makes sure that you are only paying for true business purchases.

Know your employees, doing a background check before hiring is not a bad idea.Don't allow just any person to have access to your expense account, that will ruin you.Only allow trusted employees to make business purchases.

Make sure that you know all of the tax laws that surround expense accounts.The purchases must be ordinary and necessary.If you are entertaining a client, then dinner would be considered necessary, but the food from a mini-bar in a hotel probably wouldn't.There are many fine lines, make sure that you aren't dancing around them.

You can have your expense account work from a credit card, with checks, or whatever way makes you most comfortable.A credit card is convenient, but it also might encourage purchases that are necessary or ordinary by employees.Using a check works, but if the amount is left blank then it is up to the integrity of the employee to only take what they need.

For many businesses the best way to handle an expense account is to have the employees use their own money and then bring in the receipts for compensation.That way if they purchases aren't business related then you have control over whether or not they are paid back.

If you choose to have a more inclusive expense account, then you should have a very specific break down of purchases.This will make tax time a lot easier.A full-time accountant or a tax adviser will help you know what is going to be best for your business.

All accounts should be handled and set by someone with knowledge and experience.Hiring an accountant or a financial advisor will help to ensure that your business finances run smooth.It also relieves a lot of tax time stress.