What Is an Incurred Cost?

Expenses are the total outflow of economic benefits incurred in the daily activities of an enterprise that will result in a reduction of owner's equity and are not related to the distribution of profits to the owner.

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Expenses (expenses) are incurred by the company in daily activities and will result in

When confirming expenses, you should first divide

Whether or not the cost includes losses, it should have the following characteristics:

First, the cost will eventually lead to a reduction in corporate resources, and this reduction is specifically reflected in the company's capital expenditures. In this sense, expenses are essentially a kind of outflow of resources from the enterprise. It is the opposite of the income generated by the inflow of resources to the enterprise. It can also be understood as the consumption of assets. The purpose is to obtain income and thus obtain more assets.

Second, costs will ultimately reduce

The expenses of an enterprise are usually related to the actual operating activities of the enterprise. This correlation is mainly reflected in the following aspects, which are separately described

Expense Content

The relevance of fee content means that the content of the fee must be related to the main business of the enterprise, and it must be related to the specific economic events of the enterprise. Many of the costs of the enterprise are the same, such as most enterprises All travel expenses, entertainment expenses, communication expenses, wages and welfare expenses, office expenses and other expenses incurred, but due to different industries, different sizes of enterprises, or enterprises in different stages of development, the nature of the expenses incurred often has a certain content Differences, such as food companies have health supervision fees, food testing fees, inspection and quarantine fees; chemical companies have environmental monitoring fees, pollution inspection fees; import and export companies have customs declaration fees; companies preparing to list have listing packaging tuition fees; obtain or prepare Enterprises that have obtained relevant certification standards have a certain qualification certification fee; real estate development companies have sales agency fees (commission fees), etc. Enterprises that have economic disputes and are in or after litigation will incur litigation costs, lawyer fees, etc. These costs Are related to their main business or industry characteristics or an economic event that occurs in the company A necessary connection, but imagine it, a garment manufacturing company is absolutely impossible for food inspection fees of its clothing products, which is the correlation between the cost of content.

Cost results

Since expenses belong to the category of reasonable expenditures related to income, then the occurrence of expenses will necessarily produce certain results from the perspective of logical reasoning. For example, the occurrence of advertising expenses will generally promote the growth of the company's main business income and the cost of transportation. The occurrence must be related to the flow of specific goods, and the occurrence of business travel expenses must be related to business transactions or management activities. In other words, since the generation and existence of expenses are a necessity and a reasonable expenditure, then this necessity and Reasonable should be reflected in the fact that the expenses can help the company to achieve its business objectives and help the company achieve its goals. For example, the company has continuously listed a specific expense for a long period of time, but it has never obtained revenue or other related goals corresponding to the specific expense. Realized, then, the authenticity of its costs is questionable. For example, a small business obtains a large consulting fee from a financial company, and the cost accounts for 40% of the entire period, and the company has not entrusted the financial company. Doing an account, even if there is a consulting business, it is impossible to pay such a large amount, then An expenditure may be the cost of issuing false invoices were false charged.

Time of expense

An expense document is the original document that proves the occurrence of an economic event process. The time when the expense occurs must be related to the time when the specific economic business process occurs. There are three cases when the expense document is obtained and the specific economic event occurs. Second, mid-term acquisition, and third, later acquisition, in which the expense document is obtained in the early stage and the expense document is obtained in the later stage. The time for obtaining the expense document and the actual occurrence of economic events must not be too long, otherwise it is not in line with commercial laws. , Because usually obtaining an expense document may mean that a cash outlay occurs; in addition, the correlation of time is also reflected in the time of account of the expense document and the time of obtaining the expense document cannot be too long, such as a company reimbursed in November A fee, the invoice date on the expense document is February of the beginning of the year, and the time between the occurrence of the expense document and the reimbursement time is almost a year, which is not in line with common sense. If the company has no special reason to explain, the authenticity of the expense It is doubtful that it is likely that the company received false or replacement fees from other illegal channels. In addition, the time when the other expenses occur is related to the low season of the business. For example, some intermediaries should concentrate their transportation expenses and car expenses during the high season. If there are a lot of transportation costs during the low season, this may be a false statement. For replacement costs, in addition, for seasonal production and seasonal procurement companies, there are related costs that match their seasonal production or procurement.

When determining the relevance of expense occurrence time, it is also necessary to review whether the accounting treatment of expenses conforms to the accrual basis principle, whether it is normally withdrawn and amortized, and whether the expenses are deducted in advance or lagging because it is incurred in accordance with accruals. The deduction of expenses based on the system principle involves the inconsistency of the profits of the enterprise, and then affects the corporate income tax. It may be a means for enterprises to use tax concealment in Haifa.

Source of expense document

An expense document is the original document that proves the occurrence of an economic event. The source region of the expense document must be related to the region where the specific economic business process occurs. For example, if someone goes to Shenzhen for a business trip, the reimbursed accommodation invoice can only be a Shenzhen hotel. The hotel industry's invoices must not be reimbursed with Hunan's invoices, and the office expenses reimbursed by the company should be the invoices of the city where the company's office is located. Generally, it is not possible for Guiyang's enterprises to reimburse from a department store in Dejiang County, Guizhou Invoices for office supplies, this is the relevance of the source area of the expense document.

The expense document listed by the enterprise should be an invoice issued by an enterprise capable of operating this business. For example, an enterprise incurred an auxiliary fee for ISO9002 quality certification. The issuer of the invoice must be a professional management company that implements counseling, and cannot be For an invoice issued by a certain trading company, a machinery processing company reimburses a set of tools used on machinery. It should be purchased from a trading company that specializes in machine hardware consumables and tools. It is impossible to obtain it from a professional commodity retailer. Invoice reimbursement, this is the correlation between the expense document and the enterprise industry from which the invoice originated.

Relative cost ratio

In the case of a certain size of the enterprise, or at different stages of the enterprise's development, the overall level of expenses incurred by the enterprise or the amount of certain types of expenses has a natural law. According to the perspective of management accounting, the expenses incurred by the enterprise are divided into fixed expenses And variable costs, expressed by the formula: A = B + XC, where A is the total cost, B is the fixed cost, C is the unit variable cost, and X is the output or business indicators (such as income indicators) corresponding to the output, from Looking at this formula, when an enterprise is in a certain operating scale, the overall level of its expenses can be roughly estimated. This formula can also be used to quantify a specific expense. For example, the travel expenses of sales staff usually match the sales scale of the enterprise. However, it is not a proportional relationship. Enterprises can calculate the above-mentioned function model of sales staff travel expenses according to their long-term indicators. If a company's reimbursement of office expenses should be compatible with its operating scale, a small business cannot reimburse 30,000 to 50,000 every time Office expenses, which is the correlation between the amount of expenses and the size of the business; the overall cost of the enterprise is It is composed of various specific expenses. For some conventional expenses, there is a certain proportion of the relationship with the business scale of the enterprise. In the long run, this proportion changes according to a certain trend. For example, advertising fees, product launch At the beginning of the market, the proportion of advertising costs invested by enterprises is relatively large. During the maturity period of the products, the proportion of advertising costs invested by enterprises may be small.

If an enterprise has a false statement of expenses, then when the enterprise makes a false statement of expenses, if the amount of the virtual statement is too large and the scope of the false statement is too wide, it will naturally break the correlation standard of such expenses. Relevance examination and determination is usually an important breakthrough for law enforcement agencies and audit tax reviewers to conduct cost review of enterprises, and it is also an audit method often used in audit review practice.