Bookkeeping – Other Transportation Costs (Lesson 63)

There is much more to transportation with bookkeeping than accounting for vehicle operations, addressing mileage reimbursements or tracking auto costs related to owners and family members. Bookkeepers must track the following too:

A) Parking and Tolls
B) Use of Rental Vehicles
C) Travel Including Lodging and Meals

Many new bookkeepers and accountants believe that auto leases are a function of transportation. In reality leases, no matter the asset, are a function of capital accounting and therefore not included in transportation. However, a caveat here, the interest component of the lease is included in the operations cost of that vehicle on that vehicle’s spreadsheet used to calculate total operational costs. In effect, it is treated in a similar fashion as a loan payment.

The following sections describe the three other transportation costs and illustrate how they are accounted for in bookkeeping.

Parking and Tolls

For businesses located in rural and suburban areas parking costs and tolls rarely if ever happen. For businesses in the urban and downtown areas of major cities, parking and tolls are normal and require some thought as to managing these costs. The most suitable approach is to advance the driver the necessary funds each week to cover these costs. However, modern technology alleviates quite a bit of this via electronic toll devices.

Basically, there is one toll device per vehicle. The state’s contractor for toll collections provides businesses with an electronic report monthly identifying usage per vehicle. Typically the toll contractor is prepaid a sum per month and tolls are deducted from this balance as incurred. If using the specific identification method of transportation costs, the entry will look like this (use the general journal):

General Journal
Date         ID              Ledger            Control ID     Description             DR             CR

04/10/16  1614-01     Auto – Tolls      Unit # 04      March Tolls           18.40
                1614-02     Auto – Tolls      Unit # 02      March Tolls           10.75
                1614-03     Auto – Tolls      Unit #  11     March Tolls           28.55
                1614-04     Auto – Tolls      Unit # 08      March Tolls           16.10
                1614           Prepaid Tolls                     Total March Tolls       -0-             73.80
                                                                                                               73.80          73.80

Notice in this entry there is a control ID column? Whenever a control account is used, a control ID is necessary to assign the value to the appropriate item (customer, vendor, employee, asset, auto etc.).

Often the toll contractor uses a flat automatic deduction from the corporate checking account when the fund balance requires replenishing as agreed upon in the contract. This dollar value is often spotted when reconciling the bank account. Here the entry is a debit to the prepaid expenses for tolls and a credit to the checking account. 

A similar process is used for parking. Usually the employee pays out of his own pocket or from advanced funds. The employee turns in the receipt for reimbursement (via payroll). Post the debit to the parking sub-account in transportation costs of sales or expenses).

Auto Rentals

One of the most commonly asked questions concerning transportation is how to book an auto rental. It doesn’t fall under any of the expenses within the transportation child accounts of fuel, maintenance, insurance etc. Where exactly is it posted?

Well the answer depends on the function of the auto rental. If the car is rented while on travel, the rental and the corresponding fuel, parking, tolls and additional insurance is a function of travel and the debits are recorded there. If the rental is a short-term expansion of the existing fleet for production such as renting a truck or van, post the costs of the rental to an additional child account entitled  ‘Rentals’. The associated auxiliary costs are recorded to the appropriate child accounts. Just as with other autos, add another spreadsheet to the Excel workbook for the rental. Remember, there is a difference between a leased vehicle and a long-term rental. Leases are customarily longer than one year in duration. Rentals are less than one year.

Travel, Lodging and Meals

Many businesses incur this expense as a function of normal business. Consultants, sales and on-site installers/trainers must travel to conduct business. Involved in this are a multitude of costs including:

* Air Fare
* Car Rental
* Lodging
* Temporary Services/Incidentals
* Meals & Entertainment
* Other (Internet, Shipping, Logistics) 

Some businesses may only incur this kind of cost infrequently for training or to attend conferences. Believe it or not; frequency of travel does affect the chart of accounts layout. If infrequent, use a single expense account for transportation and record all entries to this one account. I usually encourage a single account for less than 50 entries per year. A company sending out two or three employees per year for one or two trips each is only going to generate 30 to 40 entries. A single account works well.

On the other hand there are those businesses that send out multiple staff several times a year. In this case structure a parent-child account format as below:

  – Air/Train Fare

  – Car Rental/Taxi
  – Incidentals (Tipping, Shipping, Faxes etc.)
  – Lodging
  – Meals and Entertainment
  – Other

This structure allows management to understand the wide array of costs involved in sending out staff.

Another issue related to travel is whether travel is a function of cost of sales or a traditional expense. The answer lies in its purpose. If transportation is for training or information gathering (conferences and expo’s)  then more than likely it is a traditional expense as there is no direct connection to the sale of a product or service. Those businesses with infrequent travel expenditures will most likely have these costs posted to a single travel account in the expenses section of the income statement.

Whereas those businesses where travel is a requirement to serve the customer, install and train others on equipment or software; travel is a function cost of sales. Because the frequency is often, the costs of travel are allocated among child accounts as illustrated above. Also, these costs are assigned to a customer or project using a control ID as illustrated in the toll fees example earlier. I will emphasize the importance of assigning the costs to customers because often these costs do not have any markup in them per negotiated contracts. Failure to assign even a $5 tip means the profit of the company goes down exactly $5.

The travel costs are customarily organized in cost of sales as follows:

Cost of Sales
  – Materials

  – Professional Staff (Labor)
  – Subcontractors
  – Supplies
  – Travel
  – Reimbursable Costs
  – Other

Now for some guidance and helpful hints.


The Internal Revenue Service (IRS) allows businesses to deduct as a taxable deduction REASONABLE lodging expenses. This means lodging costs customarily paid by others of the same position and in a similar industry. Paying for the penthouse suite for an engineer to attend a continuing education class is unacceptable. However renting a room up to $175 per night is acceptable. The only time you will come across this is when the owner rents a suite and takes the entire family as a side vacation. Usually the room rental is $25 to $100 more per night than what is customarily paid. As the bookkeeper/accountant how do you record this?

First off, it is not your job to determine what is tax-deductible and what is not. Your job is to record the transactions accurately allowing the company’s CPA to ask the appropriate questions. The CPA determines deductibility. My suggestion is to look up the hotel’s room rate for a single bed for a night. This is the amount posted to the lodging sub-account in travel. Don’t forget to include taxes and other fees (phone calls, faxes, internet use, tipping etc.). The typical difference is between $25 and $100 per night depending on the hotel chain and location. Charge the balance to the ‘Other’  travel sub-account and note it for the CPA’s review.


In general the rule of thumb is about $57 per day in most locations and $64 per day in more expensive (high cost) localities (New York, Chicago, Washington D.C., Los Angeles and Seattle) as an allowance for meals. This is a per diem value. The problem is that most employees want to use the company credit card so the amounts will vary widely especially over longer trips. This is going to require extra work from you separating out the per diem amount, amounts not allowable and entertainment costs. Here are some suggestions:

1) Have the employee fill out a daily worksheet identifying or justifying his/her meal and non lodging expenses. Receipts are attached and non receipt items (vending machines, tips, taxi and bus fare) are detailed on the worksheet. Excel has a set of templates available including an employee travel log.
2) Advance the employee approximately $60 to $80 per day to use instead of a credit card. Cash makes the employee more aware of how the money is spent. The credit card is viewed as a never-ending source of funds.
3) Review the travel policies with employees prior to the trip and get a signed acknowledgement identifying restrictions such as the following:

* No alcohol can be purchased with corporate funds.
* Entertainment for existing or potential clients is limited to family venues; no strip clubs, illegal activities, gambling and/or acts discreditable are permitted. List examples of permitted activities.
* Food purchases are limited to family style restaurants and chains. Set a limit as to the level of restaurant and prices. Use online menus to vouch (look back) the particular restaurant’s status (high-end vs. family style).

In the income taxes section of this website exist several articles related to meals and entertainment. They go into great detail related to the rules and accounting requirements.

One last concept relating to meals and entertainment before finishing. The Internal Revenue Service has written a vast set of regulations and guidance related to this one expense.  In general meals are not deductible. However, the IRS recognizes that many business negotiations and agreements are made while sharing bread. The IRS uses the 50% rule as the starting point. In effect the meal for the host/hostess is not deductible for tax purposes no differently than personal meals at home are non deductible on the personal tax return. Only the guest’s meal is deductible. When meals involve a guest, the value of that particular meal is posted to a 50/50 identifier in the account structure as follows:

  – Air/Train Transportation

  – Lodging
  – Car Rental
  – Temporary Services/Incidentals
  – Meals and Entertainment
        – Fully Deductible
        – 50/50 Regulations
        – Entertainment
  – Other

I’m only addressing the meals while on travel. Another lesson in the advanced bookkeeping section addresses meals and entertainment in general.

Summary – Other Transportation Costs

This lesson broadens the definition of transportation to include costs involved with incidentals (parking and tolls), auto rentals and travel expenses. With auto incidentals add an additional sub-account to transportation entitled parking and tolls. Use a toll pass system publicly available from the state’s D/BMV or toll contractor to record toll usage.

With auto rentals, record the actual expense based on the function of its use. If the car is rented while on travel, post the rental to a child account in travel. For vehicles rented (for less than one year) for production or overhead use, post the cost to an additional child account for transportation entitled ‘Rentals’ assigned to the appropriate type of account (cost of sales or expenses).  

Finally travel costs are posted to the respective child account under travel. Employees should use a daily worksheet to track and account for their respective expenditures. Remember to restrict meals to a reasonable amount while on travel. For those situations involving family and non employees accompanying the primary business person, only allow costs that are normal to be posted to the appropriate accounts. The unreasonable portion is posted to ‘Other’ costs under travel. This rule is also applied to entertainment expenses. ACT ON KNOWLEDGE.

© 2017 – 2022, David J Hoare MSA. All rights reserved.

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