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PPD-Enter data to system 01

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PPD-Enter data to system 01

Uploaded by

Jemal Seid
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© © All Rights Reserved
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Microlink It College

ACCOUNTS AND BUDGET SUPPORT LEVEL III

Learning
Guide
Unit of Competence Process Payment
Documentation
Module Title Processing Payment Documentation
LG Code: BUF ACB3 07 0812
TTLM Code: BUF ACB3M 07 0812

INTRODUCTION

Welcome to the module “Process Payment Documentation

Summary of Learning Outcomes

After completing this learning guide, you should be able to:


Lo1:- Enter data to system
Lo2:- Verify payments against documentation
Lo3:- Create payment facility
Lo4:- Verify payments against documentation
Lo5:- File documentation

Lo1:- Enter data to system

In common usage, an expense or expenditure is:

 an outflow of money to another person or group to pay for an item or


service, or for a category of costs. For a tenant, rent is an expense. For
students or parents, tuition is an expense. Buying food, clothing, furniture or
an automobile is often referred to as an expense.
 An expense is a cost that is "paid" or "remitted", usually in exchange for
something of value.

In accounting, expense has a very specific meaning.

 It is an outflow of cash or other valuable assets from a person or company


to another person or company. Technically, an expense is an event in which
an asset is used up or a liability is incurred. In terms of the accounting
equation, expenses reduce owners' equity. The International Accounting
Standards Board defines expenses as

Bookkeeping for expenses

In double-entry bookkeeping, expenses are recorded as :

 a debit to an expense account (an income statement account) and


 a credit to either an asset account or a liability account, which are balance
sheet accounts.
 An expense decreases assets or increases liabilities. Typical business
expenses include:
o salaries, utilities, depreciation of capital assets, and interest expense
for loans. The purchase of a capital asset such as a building or
equipment is not an expense.

Information SHEET Cash flow


In a cash flow statement, expenditures are divided into operating, investing, and
financing expenditures.

 Operational expense – salary for employees


 Capital expenditure – buying equipment
 Financing expense – interest expense for loans and bonds

An important issue in accounting is whether a particular expenditure is classified


as an expense, which is reported immediately on the business's income statement;
or whether it is classified as a capital expenditure or an expenditure subject to
depreciation, which is not an expense.

Capital expenditures are reported as expenses when they are depreciated by


businesses that use accrual-basis accounting, which is most large businesses and all
C corporations.

Capital expenditure Vs revenue expenditure

The most common interpretation of whether an expense is of capital or income


variety depends upon its term.

 Viewing an expense as a purchase helps alleviate this distinction. If, soon


after the "purchase", that which was expensed holds no value then it is
usually identified as an expense.
 If it retains value soon and long after the purchase, it will be viewed as
capital with life that should be amortized/depreciated and retained on the
Balance Sheet.

Accounting Basics: Types of Expense Accounts


Many basic accounting rules and conventions apply to categorizing accounts
identically for all businesses. At times, other account titles or categories might be
industry- or company-specific.
Most of the balance sheet categories, assets, liabilities, and owners' (or stockholders')
equity, are common to almost all businesses, except non-profits, educational
institutions, and governments.
Income and expense categories, while primarily using common account titles, may
contain company-specific differences. There are, however, three primary expense
categories common to most businesses.
1.Cost of Goods Sold
A manufacturing business or any business that sells products has a cost of goods sold
category. These expense accounts typically include beginning and ending inventory
valuations, freight and shipping of product, bad debts created by sales and non-
payment, and other costs that directly relate to the items sold by the company. Some
organizations also include compensation expenses that are directly related to the
products made and/or sold, e.g., sales compensation or direct labor.

2.Operating Expenses
Usually the largest expense category (by the number of accounts, at least) are
operating expenses, which identify all normal costs that relate to the day-to-day
necessities of the organization. In this category, basic accounting rules specify the
inclusion of compensation, benefits, local, state, and federal payroll taxes, office
expenses, supplies, postage, travel and entertainment, advertising (amounts not
included in the cost of goods sold category), repairs and maintenance, depreciation
(the non-cash expense of writing "down" the cost of some assets over time), mortgage
or rent of facilities, utilities (telephone, electricity, heat, and air conditioning), and
professional fees (accountants and attorneys).

3,Non-Operating Expenses (or Other Expenses)


This category typically includes all other expenses that the organization deems outside
of operations. For example, corporate income taxes are often placed in this category.
Companies identify federal and state corporate income taxes after they determine their
net income (or net profit) for the fiscal or calendar year. Unlike compensation, travel, or
repairs, income taxes are not calculated (or paid) until after all operations for the accounting period
have closed.

Employee and Officer Expense Accounts


These accounts are designed to categorize amounts spent by employees, management,
and/or board of director members for the efficient performance of their duties. For
example, travel and lodging is often a major component of expense accounts.
However, on the income statement, the total for all forms of travel and lodging will
correctly appear in the travel or travel and entertainment account on the income
statement.

4.Here are the common kinds of startup expenses that most small businesses face:
Research and development costs. you need to budget for costs involved in
knowing more about your market. Interviewing potential customers or suppliers, or
photocopying trade publications and articles about your business all involve costs.

Business Plan Preparation. If you are preparing your business plan yourself, the
only cost to you is your time. However, there are entrepreneurs who need help in
developing their business plans. If you are one of those business owners, you need
to input the costs of hiring consultants or business plan writers into your initial.

Questions

1. What is expense /expenditure?


2. Explain the difference between capital expenditure and revenue expenditure?
3. State components of cash flow statement?
4. How do you record expenses?
5. What is the effect of expenses upon capital account ?
6. What are most business expense categories?
7. How do you compute net operating cash flow ?
8. How do you compute net investing cash flow ?
9. How do you compute net financing activity of cash flow ?

Define (related to Cash flow terms)

Stock ,bond, securities ,dividend,Treasury bill,long term borrowing,common stock,perifereds


stock

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