What Is a Period Cost?
Period expenses refer to the costs incurred in the daily activities of the enterprise that cannot be included in the specific accounting objects, but should be included in the expenses incurred in the current period. Period expenses are the outflow of economic benefits in the daily activities of the company. The reason why it is not included in the specific costing object is mainly because the period expense is the cost incurred by the enterprise to organize and manage the entire business activity. It has no direct relationship with the material procurement and production of finished products that can determine the specific costing object. Period expenses are not included in the cost of the relevant accounting objects, but are directly included in the current profit and loss. Periodic expenses include the following two situations: First, if the expenditures incurred by the enterprise do not generate economic benefits, or even if economic benefits are generated but do not meet or no longer meet the asset recognition conditions, they should be recognized as expenses when incurred and included in the current profit and loss. Secondly, if the transaction or event occurred by the enterprise caused it to bear a liability, but it was not recognized as an asset, it shall be recognized as an expense when it is incurred. [1]
Basic Information
- Chinese name
- Expenses for the period
- Foreign name
- period cost
- Application area
- Periodic expenses refer to those expenses that cannot be directly attributed to a specific costing object in the daily activities of the enterprise and should be directly included in the current profit and loss when incurred. Period expenses include administrative expenses, sales expenses, financial expenses and research and development expenses.
- Management cost variance
- Administrative expenses and
- Period expenses generally include selling expenses,
- Compared to product cost,
- During the production and operation activities of an enterprise, no matter what the enterprise is, the expenses incurred can be divided into the relationship with the goods or products.
- The carry-over of operating expenses, management expenses and financial expenses are carried out at the end of the period. There are two ways to carry forward the period-end expenses:
- 1. Businesses that charge expenses that should not be charged to period expenses
- There are strict requirements on product costs. For example, if the average cost of producing such a product is greater than a certain number, the person in charge must remember it or be criticized. Some grass-roots managers, such as workshop directors and plant managers, will record some expenses that should have been included in "production costs" into period expenses, thereby meeting the requirements of the company or the main plant without being punished.
- 2. Arbitrarily expand the scope of expenditure and raise the standard of expenditure
- For example,
- The control of period expenses is mainly to do a good job of budget management, establish an expense system for various expenses, and control and control expenses according to the system [4] .
- The control method of management expenses is mainly to make a budget and then control the expenditure according to the budget. This requires the preparation of a management expense budget table, which determines the expense limit according to the project sub-department, and then each department is responsible for reviewing and controlling expenditures.
- The control of financial expenses should be studied in conjunction with the control of capital costs.
- The control of sales expenses should also prepare a sales expense budget in advance, and then the person in charge of the sales department should review and control the expenditure according to the sales expense limit. In order to encourage sales staff to increase sales and reduce sales expenses, the ratio between several indicators such as sales revenue, sales expenses, and contributions can be specified in advance, and reward and punishment standards can be made.