How To Split Expenses In

Table of contents:

How To Split Expenses In
How To Split Expenses In

Video: How To Split Expenses In

Video: How To Split Expenses In
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The official definition of expenses or costs existing in the enterprise is a decrease or other expenditure of the firm's assets or the emergence of obligations as a result of the supply and production of goods. Thus, these are all those expenses that lead in the course of economic activity for a certain accounting period to a decrease in equity capital. They, as a rule, arise in the course of the ordinary activities of the enterprise, and serve to generate the corresponding income.

How to divide expenses
How to divide expenses

Instructions

Step 1

Recognition of expenses is their correspondence (assignment) to expense accounts. In this case, the expense is included in the reports only for a certain period in which it was charged to the account, regardless of the time when the actual payment occurred. All accounts receivable for recognized but not yet paid expenses (or prepaid expenses) should be recorded in accounts payable.

Step 2

Expenses that are tied to a certain period or date (for example, rent, utility bills, wages) are recognized only in that time, regardless of the timing of payment.

Step 3

It is important to take into account the direct costs that were incurred on the cost of production separately from all overhead costs that the company incurs over a certain period of time and which are difficult to attribute to the cost. This separation is reflected by account type in their plan. In turn, in reports, all accounts are grouped according to their type.

Step 4

For cost accounting, separate accounts of the "cost" type are created, which, later on, when generating a profit and loss statement, are automatically grouped as expenses, which, together with income, create the amount of gross profit.

Step 5

The remaining expenses form an indicator of net profit, and are reflected using accounts of the "expenses" type.

Step 6

When creating the structure of the cost price accounts, their composition should duplicate the income account scheme, where income is compensated by this cost price.

Step 7

Thus, all expenses at the stage of maintaining an accounting policy and a certain chart of accounts should be divided into those attributable to the cost of goods and attributable to the overhead costs of the enterprise for a certain accounting period. In this case, the expenses of the reporting period (or overheads) are those expenses that were not taken into account when assessing stocks.

Step 8

In turn, at industrial enterprises, all direct production costs should be included in the cost of production (according to the accepted calculation rules), and non-production costs should be attributed to the expenses of the reporting period.

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