សាកលវិទ្យាល័យមេគង្គកេពុជា

CAMBODIAN MEKONG UNIVERSITY

2020 Edition

LECTURE 3: EXPENSES

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 LECTURE OUTLINES
2020 Edition

1. Introduction
2. Expenses Distinctions
3. Types of Expense
4. Depreciation
5. Recording Expenses

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 EXPENSES
2020 Edition

INTRODUCTION

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 INTRODUCTION
2020 Edition

 Like materials and labour, expenses can be

categorized as follows:
 Direct expense costs
 Indirect expense costs
 Fixed expense costs
 Variable expense costs
 Expenses may be classified as capital or revenue
expenditure.

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 EXPENSES
2020 Edition

EXPENSE DISTINCTIONS

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 TYPES OF EXPENSES
2020 Edition

• Results in the acquisition of non-current

assets (NCA).
• It is not charged to the SOPL.
Capital • It is written off over time as a
Expenditure depreciation charge
(CE)

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 TYPES OF EXPENSES
2020 Edition

• Is incurred for the purpose of the trade of

the business, or
• In order to maintain the existing earning
Revenue capacity of NCA
Expenditure • Is charged to the SOPL (I/S)
(RE)

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 EXPENSES
2020 Edition

TYPES OF EXPENSE

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 TYPES OF EXPENSE
2020 Edition

 Building costs (rent, business rates & building insurance)

 People-related costs (health &safety, uniforms, training…)
 Machine operating costs (fuel or power, clean or repair…)
 Information processing costs (telephone, postage, fax…)
 Finance costs (interest or bank charges…)
 Selling and distribution costs (advertising, customer care)
 Costs of dealing with the outside world (professional fee)

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 DEPRECIATION
2020 Edition

 Depreciation is a method of writing off capital

expenditure.
 Methods of depreciation
 Straight-Line method (SLM)
 Reducing balance method (RBM)
 Machine hour method (MHM)
 Product units method (PUM)

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 DEPRECIATION
2020 Edition

SLM

• Charges the largest amount at beginning of

RBM an asset’s life.
• As asset grows older the amount charged
each period gets steadily smaller

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 DEPRECIATION
2020 Edition

• Charges depreciation in proportion of

MHM hours used to expected usage.

PUM

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 EXPENSES
2020 Edition

RECORDING EXPENSES

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 RECORDING EXPENSES
2020 Edition

 Direct expenses
 Are recorded by coding them to the appropriate job
or client
 Plant hire for a specific job or solicitor’s fee
 Indirect expenses
 Are initially allocated to cost centres and
apportioned or absorbed to reflect areas of the
business that have utilized the resource.

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 Thank You for
Your Attention and Participation

Respect for People 16