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Expense policy: characteristics and example

An expense policy is a format that has the function of serving as physical proof of an outflow of money from a company or business. It is used in accounting in order to describe the movement in detail and is usually accompanied by other vouchers for the operation.

Accounting is a discipline that aims to control all transactions that occur in a company or business at the entry or exit level of money.

This means that every time an expense is made, an investment, salaries or other types of expenses are paid, or on the contrary funds are received for customer payments and other income, the company's administration department must leave these operations recorded in your accounting system.

Just as a person must pay for what they buy, a company must do the same, although in a slightly more complex way, and for that reason it uses accounting systems.

For each type of operation, there is a specific registration format and the exit policies, as explained at the beginning, serve as proof of the payments made.

Said payments are issued to the different suppliers of goods and services of the company. For example, every business requires basic services such as electricity, internet connection, water, etc.


You also need to buy supplies to be able to do your job: stationery, office supplies, vehicles, etc., and in the case of manufacturing companies, they must purchase the raw materials to make their products.

There are many payments that a company must make to carry out its objective and each of them must be recorded. In addition, each payment or withdrawal of money must be authorized by the corresponding department (s).

Characteristics of an expense policy
The information that should be included in a typical discharge policy is as follows:

Copy of the check or electronic transfer with which the payment is made.
The concept of payment, that is, what service, input, tax, etc., is being canceled.
Signature of payment approval by the department in charge.
Date the payment was made.
Amount or total amount of the payment.
Provider identification.
The signature of the provider or person who received the payment.
It is necessary to attach other proofs such as:

The supplier's invoice (or its equivalent in case of tax payments, salary payments and others that do not have an invoice by their nature) The purchase order , which is another format where the request is made to the supplier for the supplies or items that are required. For example, if a company needs sheets of paper, it issues a purchase order to its stationery supplier, requesting a specific number of reams or packages of sheets. By including these documents, it is easier to justify the expenses and find useful information in the event of an error in the delivery of the purchased items or any other subsequent inconvenience.

In addition, it is convenient to keep related documents in a single package, as an efficient way to organize the accounting files to facilitate future reference as well as its due control.
Related concepts
The fields located below the boxes "payment concept" and "received by" are filled with the corresponding information according to each of the following definitions:

1. Account
They are numerical codes that identify the type of movement and its classification. For example, there are accounts associated with sales, production costs, banks, etc. Asset and liability accounts are generally classified.

2. Subaccount
They are itemized accounts, that is, more specific and detailed. An example would be:

Account: 110 - Banks

Subaccount 1: 110.1 - Bank X

Subaccount 2: 110.2 - Bank Y

3. Name
It refers to the name of the account as such instead of its code. In the example above, it would be "banks."

4. Partial
It is the detailed amount corresponding to each of the subaccounts included in the policy. If there is only one subaccount, it is not necessary to specify this value.

5. Debt and Credit
Every accounting account is represented in written form as a "T", that is, as a table with two columns, in which the name of the account and its corresponding amount are entered in one or another column (right or left).

The column on the left is labeled “Debt” and the column on the right is labeled “Credit”.

As stated above. There are asset and liability accounts.

Assets are basically the assets of the company, all that can be considered its property. Liabilities are debts.

Asset accounts increase their value by the amounts that are written in the column "Debt" and decrease by the "Credit". The opposite is the case with liability accounts.

6. Total
It is also called "Balance". It is the result of subtracting the value of the debit minus the credit.

With respect to the boxes “Carried out by”, “Reviewed by” and Authorized by ”, the names or signatures of the people involved in the issuance and approval of the policy are placed. This may vary according to the criteria of each company.

The "Auxiliary and" Journal "boxes indicate the names of the people who passed the information to the Auxiliary and Journal Books , which are other types of records that are part of the entire accounting system.

The Policy Number is a way of identifying the document so that it is related to the previous policies, that is, that they are consecutive numbers. Each company can create its own nomenclature regarding this aspect.

Currently, there are computerized accounting systems that facilitate the recording of operations carried out by companies.

It is important that they comply with the requirements established by the tax authorities of each country.

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