Sundries are small and random costs that occasionally appear in your profit and loss statement. But what is a sundry expense exactly? We can help you with that. This guide will aid you in determining and classifying sundry expenses in accounting. Consider the information below to understand the importance of tracking sundries in your income statements.
Sundry costs explained
Sundries are irregular, miscellaneous expenses, usually small amounts. Although they seem unimportant, they must still be included in your income statement.
Those costs are virtually opposite to your regular expense accounts, which comprise most of your expenses, such as salaries, payroll taxes, raw materials, marketing, financial costs, and other standard fees.
Sundries may depend on your industry. For instance, errands or a one-off charge for banking overseas transaction fees are considered sundry costs. However, those costs will be regular and ordinary for an international company, so they fall into frequent expenses.
Sundry costs also appear irregularly, rarely in your report. They can sum up over the year in significant amounts. That is why you need to account for them each time they occur.
How do you identify sundry expenses?
For exact expense recognition, you must have distinct rules and sundry costs are no exception. There are a few criteria that pertain to such categories as miscellaneous expenses. Here they are:
- Rare and unusual:They can emerge once or a few times a year. Your company does not organise daily gifts for retiring people.
- Low amount: If sundry expenses are infrequent, the amount of money you show in your income statement will be miserable compared with general expenses.
- Irregularand randomtiming: If miscellaneous costs occur regularly once a year, they couldn’t be considered sundry. They need to be reclassified as general costs because they have become regular.
- Unusual: You won’t see one-time fees for overseas banking transactions, shipping repackaging, or festivals and celebrations in your daily reports too often.
Note that we can’t refer to miscellaneous expenses non-cash payments like depreciation, and rent or lease payments. The sundry costs are usually one-off payments that are infrequent and unusual compared with general expenses that appear regularly in your financial statements.
Examples of miscellaneous expenses
Sundry costs may vary depending on the industry. However, in most cases, one-time expenses may look as follows:
- a gift for a retiring colleague
- one-off charges for overseas banking transactions
- festival celebration costs
- shipping repair costs
- charity donations
This is not a complete list of possible miscellaneous expenses. You need to monitor any unusual operations that occur.
Sundry expenses’ impact on the company’s income statement
Despite the infrequent nature of sundry costs, you must keep tracking them in your reports. They are insignificant but accumulate over time and can considerably influence your net worth, income, and taxes.
Bookkeepers record sundry expenses in the general ledger account and profit and loss statement. They create a single line for miscellaneous costs to avoid cluttering the income statement with zero lines of unusual and rare expenses. Since sundry costs impact your financial results, it is impossible not to account for them if total sundry expenses increase yearly.
The importance of categorising your sundry costs
Sundry items may seem chaotic and not applicable to accounting. Nevertheless, keep track of them in your general ledger for your tax compliance and bookkeeping.
Miscellaneous expenses must be categorised for proper sundries monitoring. Why your company should do that? Categorising sundry costs applies to any company regardless of the industry. The reasons to take them into account are as follows:
- Your accountants prevent the reports from cluttering with zero-line random expenses.
- Taking into account sundry costs ensures tax compliance because they are taxable.
- The financial statements without sundry costs don’t reflect your company’s economic results. So, you need to create a separate line for them to calculate your income correctly.
If you see patterns when sundries become standard costs, consider reclassifying those costs as general expenses.
How do you track sundry expenses?
Tracking miscellaneous costs is challenging because they are random and sporadic. However, omitting them could lead to painful issues with taxation and proper income statement analysis.
The best place to account for your sundry costs is a general ledger. These costs should be shown on the expenses side of the profit and loss account. The sundry expense journal entry must display a credit to cash or the bank account to position the ledger entry.
After months and even years of monitoring, sundry costs can be reclassified as general expenses. In this case, you must put it into regular expense accounts because now, each expenditure refers to a recurring expense.
Track sundries diligently to avoid overlooking them in your books. Miniscule costs being added up can wreck your accounting practice if you don’t properly account for them.
The allocation of sundry expenses in financial statements
Depending on the business size, sundry costs can be shown differently. A small business can put all miscellaneous costs in one income statement line. Large businesses, however, create separate sundry accounts that track all categories of sundries.
The typical algorithm of such bookkeeping practice is as follows:
- A bookkeeper creates a debit entry in a sundry account.
- Then, the accountant puts the bank account or cash in a corresponding credit entry.
- All sundries sum up to the overview of the whole picture of miscellaneous expenses.
If you deduct sundry costs from sundry income, you can get the net sundry expense figure for analytical purposes in one of your separate reports instead of sundry costs.
Correctly registered sundry expenses ensure tax compliance and assist in forming precise financial statements.
Sundry expenses vs general expenses
All differences are seen in comparison between those two types. Look at the table below to discern sundries from general costs:
| General expense | Sundry expense | |
| Type | These predictable operating expenses, such as employee benefits, raw materials, or department costs, usually comprise most of a company’s expenses and occur during typical business operations. | These costs are one-time charges, gifts, donations, or other small expenses. |
| Regularity | General costs are regular business expenses. Bills paid daily, weekly, monthly, quarterly, and annually refer to these categories. | Sundry costs are rare and random one-off costs. |
| Frequency | A general expense is a recurring expense. | Sundries rarely emerge in profit and loss statements as one-time costs. |
| Amount | These costs usually are considerable, especially in annual reports. | Seemingly insignificant costs can be seen as a minor figure in income statements. |
When comparing sundry expenses vs general ones, we can state that sundry expenses begin to appear randomly. In contrast, a general cost is a significant expense that may refer to one of your business operations.
Accounting best practices for recording sundry expenses
Create an incidental expense journal to track miscellaneous expenditures. Monitoring such costs in one place helps analyse patterns considering each expense. With such cost analysis, your bookkeeper forms a new account, closes old expense categories, and records existing sundry costs that are accounted for in ledgers.
Accounting software can help monitor those costs. There are plenty of accounting applications on the market. One of these is Wallester Business Solutions, an expense-tracking software that tracks general and sundry expenses. More information about it is here.
Tracking sundry costs with accounting software
Accounting applications have several benefits for users. Apps are compliant with GDPR for enhanced security considering financial transactions. Insightful analytics assists in making management decisions and many other perks. But how does it help with sundries? The advantages of using accounting software for monitoring sundry costs are the following:
- A designated sundry account can be used to record miscellaneous costs whenever they happen.
- Users can easily create or edit categories and subcategories to monitor costs and manage expense accounts, reclassifying categories if needed.
- Charts represent a graphic analysis of sundry costs. If accountants see that a particular category starts appearing regularly, they can add it to general expenses.
- Bookkeepers ensure that sundry categories are logged in the business’s Chart of Accounts.
- Paperwork decreases, but the accuracy of records increases.
- End-users can download receipts to record them, including in sundry accounts.
Sundry expenses’ tax implications
Recording one-time costs in ledgers has several advantages regarding taxation. When you consider sundries in your profit and loss account, you can offset income tax and corporation tax bills. Insignificant expenses can lower your taxable profit. Even small expenses can do that.
VAT-registered companies can reimburse VAT, which includes paid sundry costs. Thus, VAT tax liabilities will decrease in the same way as income tax bills. Well-documented and receipt-backed expenses can help with corporation tax offsets.
Tax implications considering sundry costs differ depending on the industry, size and other factors. To properly lower your tax bill, consult with your tax professional.
Do sundry expenses qualify as allowable expenses?
As we can see, sundry costs can help offset profit tax and VAT. So, regular and accurate recording of miscellaneous costs assists in obtaining reimbursements from governmental authorities. An allowable expense counts in a new account. Correctly categorising sundry expenses in this place ensures that your company won’t miss any tax-deductible item. This is another evidence of the importance of sundry expenses in accounting.
What role does a sundry income play in balancing expenses?
Random revenue is considered to be sundry income. It has the same characteristics as sundry costs except that you receive money, not pay it. Accounting practices for sundry income are the same as for miscellaneous expenses. They have the same meaning for accurate bookkeeping and calculating your company’s financial statements.
What refers to sundry income? When you receive a one-off sale on your account, a rent payment of a property, donations and revenues from a sideline business.
One-time income helps a company to lower the effect of sundries. It indicates possible sources of income for your firm.
Track sundry income regularly with the same diligence as nominal expenses to precisely assess your balance sheet, cash flow, profit and loss statement, and other accounting reports.
Conclusion
Insignificance and irregularity of sundry expenses shouldn’t mislead you. Taking into account infrequent, miscellaneous costs in your books has a vital role in financial statement accuracy, tax compliance, and tax deductions. Several nominal expenses can represent a substantial portion of a business’s expenses in financial records.
Monitoring and managing miscellaneous costs helps in identifying patterns that impact your bottom line.
Don’t omit sundry income also. It can aid in determining extra possible income streams in the future.
Whether you are a small business or a large corporation, sundry costs and income are inevitable parts of your accounting. They assist in forming precise financial statements and foster informed management decisions. Manage unpredictable funds on your own account to be in complete control of your finances.
