Orchid Bookkeeping, Bonnybridge FK4 1BE
TEL: 01324 466101
Mob: 07835 515206
There are three main types of purchases that a business makes:
Direct Costs - costs which relate directly to the sale of the product e.g. wages for the labour used to produce the product, materials used to produce the product., the goods you purchased to sell on etc.
Indirect Costs - Also known as Overheads. Rent, Office Staff Wages, Stationery - these are usually costs which have to be paid whether or not you produce or sell any products and the price does not fluctuate much with the number of products sold/produced.
Capital Expenditure (Fixed Assets) - Most things purchased or paid for by a business will be used up within a period of a year or less e.g. Materials used to produce a product, but other things are going to last much longer than a year e.g. If you purchase a new van you will still expect to have it in good working order after a year. Therefore in accounting terms it would be wrong to include the total cost of the van in only one year’s accounts. These types of items are known as Capital Expenditure or Fixed Assets and the cost of them is spread over several years and the term used to spread their cost is known as Depreciation.
A Bookkeeper can not only help you decide where to record each item of expenditure but also on how much to break it down in order to provide the most useful information for your particular business.
Whatever the type of expense, you should receive an Invoice or Receipt from the person you purchased the item from. Without this Invoice/Receipt you will be unable to claim the expense against your Profit, so you may have to pay more Tax.
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