Expenses

These are the costs incurred in running the business. Like income, expenses tend to be divided into two groupings. Direct and indirect. Direct expenses are those expenses that can typically be assigned directly to each sale as it occurs. For example, if you purchase a stock item for $100 and sell it for $150, then even though your income was $150, you can easily determine that you had direct expenses of $100, the cost of the stock item. Indirect expenses are not so easily assigned directly to particular sales. For example, the telephone bill at the end of the month would normally be proportioned for the entire sales period rather than be assigned directly to a particular sale or group of sales. It is also typically not worth the effort to assign certain direct costs (such as small amounts of insurance or freight) to particular sales if they make up a very tiny portion of the total cost. Many factors have to be taken into account before you decide the best way to handle such situations.

Indirect expenses also include such things as electricity, insurance, bank charges, cleaning costs and so forth. These are the "expense codes" you classify your supplier invoices under if you use CAPITAL Office.