Wednesday, 1 October 2014

Story of Different Expenses

There are many expenses when you develop a company. Just like the burger production company opened by Moonitez, there are too much different expenses to be recorded.

- RM100 of Raw Material cost to produce the burger.
- RM300 of Salary to the Worker that producing burger.
- RM100 of Electric Bill in factory.
- RM400 of Depreciation of Machine in factory.
- RM200 of Salary to Salesman that selling burger.
- RM100 of Interest Payment to the debtor.
- RM150 of loss from the investment.
- RM1000 loss of sell off his non-profit sausage production division
- RM50 of Foreign Exchange Rate loss

Moonitez now becomes headache. It is too much for him. Luckily he knows something  about financial reports. So he starts to fill in the expense accordingly in the financial reports.

Cost of goods sold
Raw Material, Salary of Worker, Electric Bill and Deprecation of Machine are all direct costs to produce the burger. Therefore, all of these expenses are recorded in cost of goods sold.RM900 (RM100+RM300+RM100+RM400)

Operating Expense
Salary for salesman is not direct cost to the business, it is recorded as selling expense in the section of operating expense.

Financial Expense
Interest payment and loss for investment are recorded in financial expense.

Loss from discontinued activities
Selling off sausage production division is one time loss. Therefore it is recorded in loss from discontinued activities.

Other Comprehensive Income/Loss
Foreign Exchange Rate is often recorded away from the normal annual operation activities to ease the process of addition/deduction every year. RM50 loss from Foreign Exchange Rate is recorded in Other Comprehensive Income/Loss.

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