What is an income statement? An income statement is a financial statement that shows your business’s income and expenditure. It also shows whether your business is making a profit or loss within a given period of time. Along with your business balance sheet and cash flow statement, these three documents help you understand the financial health of your business.
A frequently asked question is do utilities expenses go on the income statement? Find out more here…
What is a utilities expense?
This is basically the cost incurred by your business for using utilities such as water, telephone and IT, electricity, heating, waste disposal, and sewage. Depending on how these utilities are used costs may be allocated to different departments within your business, with the accrual basis recording the expense when used, and the cash basis will record when paid.
These costs that your business incurs during a period for using these services provided by public utility companies are therefore classed as the utilities expenses. Bear in mind that it’s typically utility providers policy to take a deposit at the beginning of the period and this deposit will be recorded as an asset on your business balance sheet and not charged as an expense as the deposit will be returned when the facility stops being used.
What are other classifications of utilities expenses?
The total amount of utilities used in order for your business to sell goods or services may be listed as a selling expense related to any direct or indirect costs of generating revenue. Utilities used for administrative duties may be listed as an administrative expense. This can include all non-production expenses such as rent, advertising, marketing, and accounting, to name a few.
What is the accrual basis of accounting for utilities expenses?
The most commonly used basis of accounting for utilities is the accrual method. This rectifies financial events by matching revenues with expenses, resulting in a more positive reflection of a business’s financial position.
Accruals often mean adjusting accounts before financial statements are issued and small businesses may not choose to use this method of accounting as it can potentially cause a financial risk.
What is the cash basis of accounting for utilities expenses?
With cash basis accounting, the total amount recorded for the use of utilities for each time period is based on the amount of cash paid for these resources during that time. This may mean that the expense is recorded in a later period.
Do I need a personal tax advisor?
Outsourced accounting services are the ideal solution if you’re unclear on any form of bookkeeping. Reputable small business accountants in London will handle all of your accounting paperwork from your bills to your bank reconciliations.
Experts with certification in the accounting field will allow you to run your business without the stress of balancing the books and other accounting paperwork. And you’ll be able to get a fast response by phone or email whenever you need to. Services will be provided to meet your needs, whether you’re self-employed or run your own small business – there’ll be a solution to suit you.