What is Expenses Expenditure and Cost
1 Expenses ?
If you use money to fulfill your needs and desires it is called expenses (common).
If money is used for the operation of the company and to repay the debt it is called expenses (commerce)
2 Expenditure ?
If you use the money for income or long term use it is called expanditure .
- Income: ⏩ Money was invested in shares,debenture, bonds and bank deposit FD
- Long term use: ⏩ buying house , vehicle, machinery , furniture
3 Cost ?
If many people join together, it is called the group and If multiple expenses are added together, it is called cost.
| particular | amount |
|---|---|
| fectory elrice charges | 200 |
| offiec rent | 300 |
| cost | 500 |
Kinds of expenses
Company expenses are divided into three types which are Production expenses, management & financial expenses , selling and distribution expenses
Production Expenses
Production expenses is the calculation of the cost of production from raw materials to the final product
Company profit and selling price of goods is determined on the basis of this calculation so this Production expense calculation is very important
There may be some confusion in calculating the cost of production because some costs are directly related to production and some costs are indirect spend on production.
For example office expenses.
Office will be alone for the product sector and the financial sector. Therefore the office expenses should be calculated separately for product and financial sector .
To avoid such confusion, the production expenses is calculated separately as direct and indirect costs.
Fixed cost and variable cost
Company output is calculated in two stages. Minimum production volume and maximum production volume.
Between these two stages some costs remain constant as production increases or decreases It is called fixed costs
Some of the cost increases when the production increases
- Fixed cost: ⏩ rent , insurance , licence, depreciation ,Ad ,
- variable cost: ⏩ Material , electric , labour cost, transport , maintenance , sales commission.
- list of expenses
- kinds of expenses
- cost
- record the account
direct expenses of material
- Opening stock of raw materialse
- Add: Purchase of raw materials
- Add: Carriage inwards,
- Add: Other direct materials used
- Add: Taxes and duties on the material purchased
- Less: Closing stock of raw materials.
- Less: Sale of unsuitable raw materials
- Less : Sale of scrap of raw materials.
- Cost of raw materials consumed
direct expenses of labour
- Store Dept labour
- Production labour
- Charges Of Cutting & Fixing Workers
- Raw Material Consumed
direct expenses
- Transport Charges
- Cutting Machine Charges
- Electric Charges
- Cutting & Fitting Expenses
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pime cost
Factory expenses
- Indirect materials
- Factory lighting and heating
- Indirect wages
- Factory/works manager salary
- Power and fuel of machine
- Factory Stationery
- Repairs and maintenance
- Depreciation of plant and machinery
- Insurance of factory
- Water & food consumption in factory
- Drawing office expenses
- Factory rent and rates
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work cost
Office cost
- Office or Administration overheads
- Office rent and rates
- Office lighting
- Office stationery
- Office furniture depreciation and repairs
- Office salaries
- Legal charges
- Bank commission
- Telephone and postages
- Office cleaning
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cost of production
Management And Selling Expenses:
The purpose of management is to monitor and regulate the activities of all departments of the company. For this purpose, the management divides all the departments of the company into three categories and sets up three head office and administration to oversee it.
I, offices administration : Three departments are in control of this office
- ✨ Purchase department
- ✨ Store department
- ✨ Production department
The expenses incurred for this office and department are called production expenses
II, offices administration : Three departments are in control of this office
- ✨ Financing department
- ✨ HRM department
- ✨ Accounting and auditing department
The expenses incurred for this office and department are called management expenses
III, offices administration : two departments are in control of this office
- ✨ Sales department
- ✨ Marketing department
The expenses incurred for this office and department are called selling and distribution expenses
- list of expenses
- kinds of expenses
- cost
- record the account
Selling And Distribution Expenses Expenses
- Salesmen's salaries
- Salesmen' commission
- Showroom rent
- Showroom expenses
- Advertisement
- Sales office rent
- Travelling expenses
- Warehouse rent and rates
- Warehouse staff salaries
- Repairs and depreciation of delivery vans
- Carriage outward
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cost of sales
Management Expenses
- Office salaries
- Rent, rates and taxes
- Printing & stationery
- Postage & Telegrams Telephone charges
- Legal charges
- Audit fees
- depreciation on office
- Insurance
- General expenses
- Office lighting
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operating cost
Financial expenses
- Interest on capital
- Interest on loans
- Discount allowed
- Discount on bills
- tax
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topics