Traveling Expenses Journal Entry

Traveling expense is the expense that company pays for conducting the business operation far away from the normal business location.

Many companies choose to spend their travel expenses on their employees. This is because it is often more cost-effective and efficient to have employees travel to client meetings, training sessions, and conferences rather than hiring outside consultants. In addition, it allows employees to build relationships with clients and colleagues and learn new skills. Spending on employee travel can also be a tax-deductible business expense. When done correctly, investing in employee travel can be a wise decision for both the company and the employees.

There are a few ways to help control these costs, such as negotiating discounts with airlines or hotel chains or consolidating travel bookings through a single travel agency. You can also encourage employees to make use of less expensive options whenever possible, such as flying economy class or staying in less expensive hotels. If your company spends a lot on travel expenses, it may be worth hiring a full-time travel manager to handle all of the details and help keep costs under control. By taking a few simple steps, you can help to ensure that your company’s travel expenses are reasonable and manageable.

This expense is normally treated as the operating expense report on the income statement. It is part of the company’s operation that company spend to send the employees to join the meeting, training, and other business operation.

However, some company allocates it as the cost of goods sold (cost of service). It can happen to the service company that provides different services to many customers. Only a few customers whose location requires the traveling expense. It depends on the company policy and the intention behind it.

Journal Entry for Traveling Expense

Traveling expenses are the expense that the company pays for the employee’s travel to perform service for clients.

The company needs to record the expense when the expense incurs rather than paid.

The journal entry is debiting travel expenses and credit cash.

Account	Debit	Credit
Travel Expense	XXXX
Cash		XXXX

The travel expense will be recorded as the expense on the income statement. It is part of the operating expenses. Some companies may record it as the cost of goods sold if they can allocate it to a specific project such as a service performed for the client.

Most of the travel expenses are paid by cash, so it will impact the company’s cash balance.

Example

ABC is a consulting company that provides various services to clients in rural areas. The company needs to send the employee to inspect the client’s site in various locations. As a result, The company has spent $ 5,000 on travel expenses. It is not possible to make proper allocation of the expense to each client, so the company decides to record it in the operating expense.

The company has to record the traveling expense in the financial statement.

The journal entry is debiting traveling expenses $ 5,000 and credit cash $ 5,000.

Account	Debit	Credit
Traveling Expense	5,000
Cash		5,000