What are the costs?
The costs incurred is any costs that the company has to pay in business, whether it is items or for renting space. Instead of reporting the costs incurred on the day they are paid, it is usually stated on the day when business becomes responsibility for payment. One of the important reasons for reporting and monitoring these costs is to ensure that it has to watch how much it has to pay, so it will not forget any payments. Another reason is that the income will be balanced against obligations, and if income is lower or equal to obligations, then this can cause a problem.
The operation of the company is associated with many costs and all of them should be shown as costs incurred. For example, if a company buys equipment or has to pay credit card accounts, then both occur and are reported in the same way. Although costs are associated with an asset or something that will be used for profit, such as stocks or stocks, the costs of these items are still incurred and should be reported.
While the company can report the costs incurred on the day it is paid, it is rarely done and can go against some accounting principles. Instead, business usually writes responsibility on the day it happens. For example, if the retail company receives an inventory in November, but does not have to apply an invoice until December, then the costs should be reported in November, when the inventory arrives.
Business usually has many things to pay for, and one of the reasons for reporting incurred costs is to help business know what accounts must be paid. In addition to accounting principles, this is another reason why the obligations are reported on the day it comes. This prevents business from being forgotten before the cost is accidentally forfeited to the payment.
After the month is higher, accountant or other business staff usually compares the income of income to the cost to ensure that business is still doing well. If they are nAid lower than income, there should be no problems; If costs are more than or equal to income, the company may have difficulty. For example, if an enterprise has a monthly income of $ 10,000 USD (USD), but obligations are $ 10,000 or higher, it leaves no profit and can lead to any bankruptcy.