![]() ![]() Companies often make cash payments at the point of sale for small items like supplies. Companies Can Incur Expenses and Pay in the Same Reporting PeriodĪs mentioned above, companies incur expenses whether the business paid cash or not. This means that even without a supporting document like a purchase order or an invoice, the company can incur an expense. Interest expense is an example of an expense incurred over time. However, companies also incur an expense due to the passage of time or consumption. Like the example above, operating expenses like supplies would be on purchase. When Do Companies Incur an Expense?Ī business incurs an expense in two instances – upon purchase or when it consumes a resource. However, a company can incur an expense in other ways. The expenses incurred would then be part of the Cost of Goods or Services sold. When the grocery store needs to restock and order milk, it incurs an expense whether the order gets paid upon delivery or in net terms. When your business enters a transaction to procure goods or a service, it owes money to the supplier and therefore incurs an expense.įor instance, a grocery store needs to purchase milk from the manufacturer to sell to its customers. Incurred refers to being liable for a loss or an expense during the accounting period that would lead to actual or potential spending for your company.Ĭompanies need to purchase goods or services to produce a product or perform a service. Incurring an expense is part of running a business regardless of the industry. Companies Incur Expenses By Doing Business This post will focus on incurred and accrued expenses to better understand the accounting process. While incurred and accrued mean different things, some may confuse one for the other. Here we also discuss the definition and list of operating expenses which includes traveling utility, legal and advertising expenses.In accounting, incurred refers to when the business owes money as a result of a transaction, while accrued refers to the practice of recording financial transactions as they happen – regardless of any cash exchange. This is a guide to List of Operating Expenses. But they should be careful while doing this because reducing operating expenses may result in a short-term increase in profit but can impact the company’s earnings in the long run. A company’s management is always trying to reduce expenses and increase profit. Operating expenses are necessary for the smooth running of the business. List of operating expenses comprises one of the most important aspects of the business i.e. ![]() This expense does not include trade discounts offered to customers for increased sales. Advertising Expenses: Advertising expenses incurred by the company for promotion and advertising activities aimed at increasing sales are charged under the head of advertising expense in the profit and loss account.Insurance Expenses: Insurance expenses, including fire insurance for premises, medical insurance, and general insurance of staff, are also considered operating expenses as they help secure the business’s resources.Repair and Maintenance Expenses: Expenses incurred on the repair and maintenance of assets used for production or manufacturing purposes are treated as operating expenses.Legal Expenses: All legal and professional expenses incurred by the company for procuring expert advice regarding legal and professional matters are categorized as operating expenses.Property Tax: The property tax paid on the office building by the company is considered an operating expense.Some companies also reimburse the employee’s home mobile and landline bills. Telephone Expenses: They represent landline or mobile expenses incurred while doing official tasks on office premises or using an office mobile.They are categorized as operating expenses as they help in the smooth running of the company’s day-to-day operations. Utility Expenses: These expenses include water and electricity bills for the office.Just like other operating expenses, this is also charged to the profit and loss account of the company. Office Stationery and Supplies: These are expenses incurred to buy office stationery and supplies for usage by the staff on a daily basis.Sometimes these expenses are directly paid by the company, and at other times, these are reimbursed by the company later on. An official visit would include meeting with customers, selling prospects, and official events. official visit, these expenses are called traveling expenses. Traveling Expenses: When the company staff incurs travel expenses that are required as part of their official duties i.e. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |