Incidental Expenses are minor expenditure connected with business operations. Such expenses are not budgeted. Also these expenses can’t be estimated before they are actually incurred. Example of such incidental expenses would be room service tips while the employees are on business travel.
Features of Incidental expenses
- Very minor or meager nature
- Necessary for business operations
- Expenditure are ancillary or associated to daily business operations
- Considering meager amount expended , such expenses are clubbed in other expenses
- Risk of undetectable fraud as there are too many small expenditure to be checked for authenticity
Treatment of Incidental expenses
- Treated to be out of pocket expenses for employees & hence won’t be accounted for by the company. This would be an additional burden for the employees & would be expended right out of their taxable salary income
- Reimbursement of incidental expenses incurred by employees. This would require the employee to account & submit list of expenses incurred while they are travelling.
- Allowance to employees for spending on such expenses. This also requires list of expenses as incurred by employees. This actual expenditure would only be claimed & rest of the allowance is taxable.
Examples
- Laundry expenses in hotels
- Wi-Fi expenses in hotels or outside office premises
- Expenditure on meals or refreshments provided to employees while they are on business trips
- Local transportation expenses while employees are on business travel
