In accounting and business travel policy, what is the meaning of the term per diem?

Introduction / Context:
The term per diem is widely used in business travel policies and accounting for employee reimbursements. It allows organisations to simplify the process of paying employees for daily travel expenses. This question checks whether you know what per diem means in this context and how it is used. It is important knowledge for payroll, HR, and finance professionals.

Given Data / Assumptions:

• The term appears in the context of accounting and travel policy, not in general language only.
• Employees sometimes travel for work and incur daily expenses such as meals and local transport.
• Organisations may choose between reimbursing actual receipts and paying a standard allowance.
• Per diem is related to daily payments rather than annual or monthly amounts.

Concept / Approach:
Per diem is a Latin expression meaning per day. In business usage, it refers to a fixed daily allowance that an employee receives when travelling on official business. Instead of collecting and submitting receipts for every meal and small expense, the employee receives a standard amount per day to cover meals, minor local travel, and incidental costs. This simplifies administration and provides clarity to both employer and employee. The allowance is usually defined by company policy and may vary by location or employee level.

Step-by-Step Solution:
Step 1: Translate the term per diem to its basic meaning per day.Step 2: Connect this with business travel, where daily expenses like food and minor incidentals occur.Step 3: Recall that many companies set a per diem rate, such as a certain amount per day, instead of reimbursing actual small receipts.Step 4: Review the options and find the one that describes a fixed daily allowance for travel expenses. Option A does this clearly.Step 5: Confirm that the other options refer to bonuses, monthly salary, or tax penalties, which do not match the meaning of per diem.

Verification / Alternative check:
In practice, travel policies often specify domestic per diem rates and international per diem rates. Employees may see these rates in their travel approvals and expense reports. They are described as daily allowances, for example a certain amount per day in a given city. This matches the definition in option A and not any of the other descriptions, verifying the correct answer.

Why Other Options Are Wrong:
Option B describes a one time joining bonus, which is not linked to daily travel and does not reflect the meaning per day. Option C treats per diem as annual salary divided by twelve, which is simply monthly salary and not a daily allowance. Option D introduces a tax penalty, which again has no connection to travel allowances. These options ignore the daily nature and travel context of per diem.

Common Pitfalls:
Some candidates confuse per diem with daily wage or think it refers to the daily portion of salary. Others see the term in legal or tax documents and misinterpret it as a penalty or fee. To avoid such mistakes, always associate per diem in payroll and accounting with daily travel allowances and reimbursement policies, not with fixed salary or penalties.

Final Answer:
Per diem is a fixed daily allowance paid to an employee to cover travel related expenses such as meals and incidentals instead of reimbursing actual receipts.