Cost of Sales or Expenses

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racoro17
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Cost of Sales or Expenses

Hi,

 

I'm needing some clarification on what types of materials & expenses need to go under cost of sales and expenses. 

 

As a Tiler, I buy all of my materials from a few different tiling stores. I purchase grout, silicone etc. Do these go under cost of sales? What about paying a sub-contractor for work they help me with? 

 

Where would car fuel, car insurance, public liability insurance etc go under? 

 

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Tracey_H
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Re: Cost of Sales or Expenses

Hi @racoro17 

 

Thanks for your post. Cost of sales is the material or labour directly associated with a sale, in your case, this would mean the materials that you purchase to complete a tiling job. Expenses are the running costs of your business, for example, insurance, vehicle expenses, phone, fees, subscriptions, advertising. One way to look at it is, if you need it to do the actual tiling job it's a Cost of sale.

 

Using the Cost of Sales accounts enables you to run an accurate Profit and Loss report showing the Gross Profit (Total Income less Total Cost of Sales). The Gross Profit (Loss) allows you to analyse the cost of materials and amounts you are charging clients for the actual jobs you are performing. Your expenses are then deducted from the Gross Profit to give you the Operating Profit (Loss) of your business.

 

I'll reply to your sub-contractor post with information on that subject. If you need further help on this post please do click on Reply to ask more questions.

 

If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

Cheers,
Tracey
Previously @bungy15

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