Standard Operating Expenses – Recording Expense Transactions Expense transactions, just like any other, call for journal entries. The timing of your entry depends on which accounting method your company uses. Under the cash method, you record expenses only when you actually pay them. Under the accrual method, you record expenses as they are incurred. For … Read more
Standard Operating Expenses – Employees Cause a Lot of Transactions Employees are often the single biggest expense a company can have. Not only that, they also bring on a lot of transactions and add more accounts to your system, as you’ll see in Chapter 9. First, you have to pay them, and that’s usually a … Read more
Standard Operating Expenses – Don’t Forget Amortization Amortization expense is similar to depreciation, except it works only for intangible assets. This expense measures decline in the value of those assets over time. How do intangible assets decline in value? Well, they don’t wear out or rust, but some of them, such as patents, have specific … Read more
Standard Operating Expenses – All about Depreciation Depreciation is the accounting way of measuring the wear and tear on your fixed assets. Although it has no impact on cash, it is part of your expenses. That means it lowers your company’s net income, which means lower taxes. When you buy assets, you don’t get to … Read more
Standard Operating Expenses – Understanding Overhead A lot of people throw around the term “overhead” without really knowing what it means. It’s often considered a catchall for anything that’s not a direct product cost, and that’s partly correct. Sometimes it’s called fixed expenses, and that’s also only partly correct. The true definition is this: Overhead … Read more
Standard Operating Expenses – What Goes into Selling Costs Selling costs include just what you would expect: any expense involved in selling your products or services that tie in directly with sales. For example, sales commissions would count as a selling cost, as would shopping bags and delivery charges (when you deliver something to your … Read more
Standard Operating Expenses – A Look at Expense Categories One of the oldest business clichés is this: You have to spend money to make money. Expenses are the standard costs of doing business, and there’s really no way around them. On the plus side, expenses are tax deductions, and that means a lower tax bill … Read more
The Inventory-Cost Connection: Figure Out Cost of Goods Sold In order to figure out your profit or loss for a period, you need to know several key figures. One of the most crucial is the cost of goods sold; with that number, you can calculate your gross profit and begin to get down to the … Read more
The Inventory-Cost Connection: Extra Steps for Manufacturers Not only do manufacturers need extra steps to figure out their product costs; they also have to deal with three distinct types of inventory: raw materials, work in progress, and finished goods. Raw materials inventory includes any untouched building blocks that you will eventually use to create your … Read more
The Inventory-Cost Connection: Four Ways to Value Inventory There are four ways to keep track of how much your inventory is worth: Last in, first out (LIFO) First in, first out (FIFO) Average cost Specific identification The method that works best for your business depends on what type of inventory you keep. When you offer … Read more
