Admin and distribution expenses

Hi, I'm struggling to get my head around what goes in these. Can anyone help? I've had a break from a year and struggling with these.

Rev - returns inwards

Purchases - returns outwards

Distribution:
Advertising
warehouse costs
delivery costs
vehicle and plant dep
sales and delivery staff wages

Advertising
Office
general expenses
bad debt expense (irrecov expense same thing??)
office staff wages

If interest is accrued is this added to finance costs?

In regards to prepayments and accruals - if they are in the tb do they go in here or not?
In additional info if something like advertising is to be accrued - add to distribution, prepay deduct?

If it is insurance accrual add to admin or deduct a prepayment

Thank you in advance any help is appreciated!

Comments

  • Clintm15Clintm15 Well-Known FarehamPosts: 207Registered
    "If interest is accrued is this added to finance costs?"

    Yes, that is correct. The general layout (by function) for the SPL will be;

    Revenue - COGS = Gross profit
    Gross profit - Overheads = Operating profit
    Operating profit - Finance costs = Profit before tax
    Profit before tax - Tax = profit after tax

    I found it easier to have a pro-forma like this in my head. Then you learn what types of expenses go where after. Like returns and carriage will form part of COGS, any indirect expense like admin and most non-cash charges like depreciation and bad debt (yes irrecoverable is the same) will be overheads.

    "In regards to prepayments and accruals - if they are in the tb do they go in here or not?"

    You can split a trial balance into 2 parts. Part will form the SPL and the other will for the SFP. Prepayments and accruals have an entry in each.

    For example;

    Say at year end a company owed the last quarters telephone bill, entries would be;

    DR Telephone bills account (This will go into the SPL)
    CR Accruals (This is held in the SFP until paid)

    For prepayments the entries would be;

    DR Prepayments (Held in SFP as an asset)
    CR Advertising (This will reduce the expense in the SPL)

    "In additional info if something like advertising is to be accrued - add to distribution, prepay deduct?"

    You would add to advertising.

    "If it is insurance accrual add to admin or deduct a prepayment"

    Insurance accrual could be added to whatever class of expense you want, can even have its own insurance account. This is why I suggested the pro-forma above, it's just an overhead. Accruals and prepayments are different, they do not interact. An accrual is an expense owed, a prepayment is pro-rata of an expense because some of it belongs in the next financial year. This mainly happens with annual subscriptions.

    Hope this helps.
    AAT
    Level 2 - 2011
    Level 3 - 2012
    Level 4 - 2013

    ACCA
    F4 - Corporate Law - Dec 2015 (passed)
    F5 - Performance Management - Dec 2014 (passed)
    F6 - Taxation - Dec 2013 (passed)
    F7 - Financial Reporting - Jun 2014 (passed)
    F8 - Audit & Assurance - Dec 2015 (passed)
    F9 - Financial Management - Jun 2015 (passed)
  • low1low1 Posts: 6Registered
    Thank you, that was great but could you also clarify (in really easy terms) if the tb has prepayments and accruals (without any other info) showing (I know the other side will be in assets and liabilities) but in the profit and loss are they included or not? This is where Im getting a bit confused :s
  • Clintm15Clintm15 Well-Known FarehamPosts: 207Registered
    I'll try to be as clear as I can.

    Technically the trial balance will be split into 3 parts.

    1. Profit and loss
    2. Assets and liabilities
    3. Adjustments

    The adjustments will contain:

    Accruals
    Prepayments
    Depreciation charges
    Closing inventory
    Bad debt
    Allowance for doubtful debts

    Each one of these adjustments has a debit and a credit like all other transactions. However, each of these adjustments will have an effect on both the 'profit and loss' part and the 'assets and liabilities' part. So if one has a debit in the 'profit and loss' it will have a credit in the 'assets and liabilities' and vice versa.
    AAT
    Level 2 - 2011
    Level 3 - 2012
    Level 4 - 2013

    ACCA
    F4 - Corporate Law - Dec 2015 (passed)
    F5 - Performance Management - Dec 2014 (passed)
    F6 - Taxation - Dec 2013 (passed)
    F7 - Financial Reporting - Jun 2014 (passed)
    F8 - Audit & Assurance - Dec 2015 (passed)
    F9 - Financial Management - Jun 2015 (passed)
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