Archivio Categoria: Bookkeeping

As the company sells more products, the cost of goods sold increases. For example, if you are paying too much rent on office space or buying supplies in bulk that are never used up before they expire, these costs will add up over time and hurt the bottom line of your company’s profits. Usually, the […]

For example, if a business owner schedules a carpet cleaner to clean the carpets in the office, a company using the cash basis records the expense when it pays the invoice. Under the accrual method, the business accountant would record the carpet cleaning expense when the company receives the service. Expenses are generally recorded on […]

These obligations include mortgages or rent, employee salaries, insurance costs, loan payments, and property taxes. An expense is the cost incurred in order to generate revenue or obtain something. An alternative definition is that an expense is the reduction in value of an asset as it is used to generate revenue. If the underlying asset […]

The type of labor involved will determine whether it is accounted for as a period cost or a product cost. However, other labor, such as secretarial or janitorial staff, would instead be period costs. Both product costs and period costs may be either fixed or variable in nature. Period costs are costs that cannot be […]

In short, all costs that are not involved in the production of a product (product costs) are period costs. Product costs are all the costs that are related to producing a good or service. These items are directly traceable or assignable to the product being manufactured. Product costs only become an expense when they are […]

Speaking of financial statements, it’s important that you take the time to review your financial statements on a regular basis. This can be particularly important for small business owners, who have less room for error. If product and period costs are overstated or understated, or not recorded at all, your financial statements will be wrong […]

Also, fixed and variable costs may be calculated differently at different phases in a business’s life cycle or accounting year. Whether the calculation is for forecasting or reporting affects the appropriate methodology as well. Knowing how much money a business spends on periods of expenses helps its owners and managers understand where their cash flows from operations come […]