- Controllable Expenses
- Salary expenses — Base pay plus overtime.
- Payroll expenses — Include paid vacations, sick leave, health insurance, unemployment insurance and social security taxes (employer paid portion).
- Outside services — Include costs of subcontracts, overflow work and special or one-time services.
- Supplies — Services and items purchased for use in the business.
- Repair and maintenance — Regular maintenance and repair, including periodic large expenditures such as painting.
- Advertising — Include desired sales volume and classified directory advertising expenses.
- Car delivery and travel — Include charges if personal car is used in business, including parking, tools, buying trips, etc.
- Accounting and legal — Outside professional services.
- Dues and subscriptions.
- Fixed Expenses
- Rent — List only real estate used in business.
- Insurance — Fire or liability on property or products. Include workers’ compensation.
- Loan repayments — Interest on outstanding loans.
- Licenses and permits.
- Miscellaneous — Unspecified; small expenditures without separate accounts.
- Depreciation — Depreciation is when a company purchases a fixed asset and expenses it over the entire period of its useful life, rather than in the year purchased. The IRS has established depreciation schedules depending on the type of asset. Depreciation is a non-cash expense on the income statement with the difference being that the cash flows out when the asset is purchased, but the expense is written off over a period of years. Depreciation can be included in cost of goods sold if the expense is associated with a fixed asset that is used in the production of inventory.
- Other income and expenses:
Other income and expenses are items that do not occur during the normal course of business. Interest expense on debt is normally included in this category. A net figure is computed by subtracting other expenses from other income.
- Net Profit (or Loss)
(before taxes) – Subtract total expenses from gross profit.
Taxes – Include inventory and sales tax, excise tax, real estate tax, etc.
(after taxes) – Subtract taxes from net profit (before taxes)