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Thread: Cost of Sales

  1. #1

    Contractor Among Contractors


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    Default Cost of Sales

    Which of these should be reported as "Cost of Sales", or is it arbitrary what to include? -

    • Director's salary ?
    • Pension contribution ?
    • PAYE NICs ?
    • Travel expenses ?

    Reason for asking is that in MyCo's financial statement, 3 of the above are accounted for under COS whereas the other is accounted for under Administrative Expenses. I'm going to query this with the accountant but it would be nice to get other opinions. Thanks.

  2. #2

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    I think there is a strong element of subjectiveness to this and different accountants might have slightly different views.

    I'll dig out my last set of accounts when I get into the office and see what was under mine.

    In my head I've always thought of cost of sales as direct costs in making a sale whereas remuneration is somewhat orthogonal to this.

  3. #3

    Fingers like lightning

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    Quote Originally Posted by Contreras View Post
    Which of these should be reported as "Cost of Sales", or is it arbitrary what to include? -

    • Director's salary ?
    • Pension contribution ?
    • PAYE NICs ?
    • Travel expenses ?

    Reason for asking is that in MyCo's financial statement, 3 of the above are accounted for under COS whereas the other is accounted for under Administrative Expenses. I'm going to query this with the accountant but it would be nice to get other opinions. Thanks.
    Our opinion is that the expenses would be recorded as administration expenses (although I am unsure about the third one, I assume this is employers NI).

    Cost of sales are costs directly related to the sale, for example manufacturing costs, attributable labour costs and allocated overhead costs. They are typically seen in manufacturing companies and retailers etc.

    I hope this helps.

    Martin

  4. #4

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    Ok the only thing I had in my last years accounts under cost of sales was my £60 company iOS developer program account subscription.

    All remuneration and employee expense payments came under admin expenses.

  5. #5

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    From my creaky memory of my Cost Accountancy days, COS is what Martin has described, the effort and material costs directly attributable to the specific piece of work. All else is admin overhead.

    A bit academic if you only have one or two contacts to fulfil, of course and you don't need to do detailed comparisons between different sales efforts, costed risk assessments and contract fulfilment costs.
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  6. #6

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    Default You what

    I like 'Orthogonal'.

    Didn't cover that in my o'level English at my comprehensive.

    I have to find a way to include that in my next business spec

    cheers

  7. #7

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    Quote Originally Posted by billridley View Post
    I like 'Orthogonal'.

    Didn't cover that in my o'level English at my comprehensive.

    I have to find a way to include that in my next business spec

    cheers
    I managed to sneak "juxtaposed" into a technical upgrade document once. Oh the laughs...
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  8. #8

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    Default An example

    Agree with directly attributable costs comments above.

    It really depends what your business is. For example, fuel costs might be a cost of sale if you are a haulage company. If you're a software engineer, it's probably an expense.

  9. #9

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    Quote Originally Posted by billridley View Post
    I like 'Orthogonal'.

    Didn't cover that in my o'level English at my comprehensive.

    I have to find a way to include that in my next business spec

    cheers
    I thought all IT geeks were proficient in matrix algebra...

  10. #10

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    Agree with Martin
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