Purchases and Cost of Sales

[spb888]

Hello

Can someone please explain what sort of expenses should go under Purchases, don't understand it? Also, if you provide a service what expenses would go under Cost of Sales?

Clients are charged expenses for travel, cost of printing, stamps, cost of advertising on their behalf etc in their invoices? Would these go under either of the above?

Many thanks in advance
spb888

[charliemi]

Your accounting statements will vary significantly depending on the nature of your business. If you are a manufacturing firm your statements will be very different to a consultancy.

Best to ask your accountant, but if you want to do it yourself, one strategy is to find a publicly listed company who do the same thing as you and look at their accounting principles and then allocate costs and expenses as they do it.

Assuming you are a service based consultancy company (perhaps incorrectly) directly attributable costs relating to specific revenue could justifiably be allocated into cost of sales rather than general and administrative charges.

If you are posting a client lots of specific material to them at great expense then this would be cost of sales, but if you are doing mass marketing campaigns then this would be general and administrative charges.

More details on your company would be handy.

[spb888]

Thanks for your response charliemi, appreciated.

The business is virtual assistant. Will try out your suggestion but if you have any more info to add, would appreciate that too :).

Many thanks
spb888

[Minuteman Press]

Cost of sales = Direct costs.