What are the expenses?
What is an expense, is such an expense of expenditure that a person or company spends to earn more profit. When any person starts a business, first he has to invest capital in the business. Even if the expenditure is called investment, it does not make a wrong sense, because when a person spends money in business, he spends it only to earn more profit. If the definition of expenses is given in simple words, then the money spent to earn more profit is spent, expenses include office bills, salary, rent, light bill, telephone bill, etc.
What are Expenses in Tally Accounting?
What are direct and indirect expenses? when a person starts a business, there are many types of expenses in the business, such as rent, salary, electricity bill, telephone bill, rent, petrol, stationery, courier, etc. So these expenses are called expenses in the language of accounting. Now it comes to the fact that there are two types of expenses, Direct Expenses, and Indirect Expenses, and when an accountant enters these expenses in tally, it becomes difficult to identify which expenses will go to direct expenses and which ones. I will go for indirect expenses.
Today I will tell you in very simple words that how many types of expenses are there, how to identify them, and which expenses will come under which category.
Types of Expenses in tally accounting
1. Direct Expenses
2. Indirect Expenses
Direct Expenses:- Expenses that are incurred by purchasing the material and bringing it to the factory till its manufacturing, we call them Direct Expenses,
Example Purchase, freight, carriage, wages, octroi, handcart rent, etc.
Indirect Expenses:– When the raw mall reaches the factory, then the expenses incurred between its production and production are called indirect expenses. These expenses can be daily as well as monthly.
Example:- Salary, Electricity bill, stationery, petrol, rent, postage & courier, tea, water bill, telephone bill, etc.
How To Maintain Expenses in tally Accounting
When there are direct expenses and indirect expenses in business and if we maintain it in tally, then it becomes our profit & loss account and we get to know the net profit or net loss of the business. If we also want to see the full account of someone, then we can easily extract his complete details. And by this, we get to know the real status of the business. We can also see the details of these expenses monthly, or we can also easily see the record since we have maintained these expenses in tally.
Why it’s important to put expenses in their right Group
Many times it happens that we maintain all our expenses in our tally, but still, we are not able to know the profit or loss of our business properly or tell it wrong. So the reason for this is that the expenses you have maintained in the tally have been put in the wrong group. Due to which your Profit & Loss account becomes incorrect, and cannot give the actual result. so you enter the rules according to their group of all expenses so that your Profit & Loss account is prepared properly and you can find out your business real status.
What are Prepaid expenses and outstanding expenses in tally
In Tally, apart from direct expenses and indirect expenses, there are 2 types of expenses, which are called prepaid expenses and outstanding expenses. These expenses are not maintained in the profit and loss accounts. Prepaid expenses and outstanding expenses are either assets or liabilities of a company. Which is shown in the balance sheet by any company or person. Let’s understand them.
Such expenses which have been paid by the company ahead of time and the goods or services have not yet been taken by the company, such expenses are called prepaid expenses. Prepaid expenses are the current assets of a company because it is paid by the company ahead of time. You can understand prepaid expenses with the example of an insurance company.
But outstanding expenses are such expenses whose services have been taken by the company but that service has not been paid for yet. Outstanding expenses are the liability of any company which the company has to pay in the coming time. Examples of these are telephone bills, light bills, electricity expenses, office rent. The accountant has to maintain the prepaid expenses and outstanding expenses in the balance sheet of the company.
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