Expenses (Income Statement)

Income Statement 

2.) Expenses 

Expenses are the costs a company incurs to generate revenue and run its daily operations. They reduce net income and are reported on the income statement.

1. Cost of Goods Sold (COGS)

  • Direct costs of producing goods or services sold

  • Includes raw materials, direct labor, and manufacturing expenses

    • Includes: 

      • Subcontractor expenses 

      • Equipment rental 

      • Supplies (we will get receipts from Oscar) 

2. Salaries and Wages Expense

  • Payments to employees for their services

  • Includes bonuses, overtime, and employer payroll taxes

3. Rent Expense

  • Cost of leasing property or equipment used in operations

  • Can be for office space, warehouses, or machinery

4. Utilities Expense

  • Costs for electricity, water, gas, and internet

  • Necessary for day-to-day operations

5. Depreciation Expense

  • Allocation of the cost of tangible assets over their useful life

  • Applies to assets like machinery, vehicles, and buildings

    • Does not apply right now because we don’t really have any PP&E 

6. Amortization Expense

  • Similar to depreciation but for intangible assets

  • Includes patents, trademarks, or software licenses

    • Will be relevant when we gain intellectual property 


7. Insurance Expense

  • Cost of business insurance policies

  • Can include liability, property, health, or auto insurance

    • Will come up when we implement Aflac 

8. Advertising and Marketing Expense

  • Costs for promoting products or services

  • Includes online ads, billboards, sponsorships, and printed materials

    • Includes the following subscriptions: 

      • LinkedIn Navigator 

      • Mailchimp 

      • Hubspot

      • OpenPhone  

9. Office Supplies Expense

  • Consumables used in daily office operations

  • Examples: paper, ink, pens, folders

10. Repairs and Maintenance Expense

  • Costs to maintain or repair equipment and facilities

  • Keeps assets in usable condition

    • Will apply when we have to go fix our cameras 

11. Travel and Entertainment Expense

  • Costs for employee travel, lodging, meals, or client entertainment

  • Often includes conferences, business trips, and client meetings

  • INCLUDES when James buys stuff for clients (donuts, client dinners, etc) 

12. Professional Fees

  • Payments to external service providers

  • Examples: legal, accounting, or consulting services

    • Will be relevant when we set up the trust 

13. Interest Expense

  • Cost of borrowing money

  • Includes interest on loans, credit lines, and bonds

14. Taxes and Licenses

  • Government-imposed business expenses

  • Includes business licenses, property taxes, or franchise taxes

15. Bad Debt Expense

  • Estimated losses from uncollectible accounts receivable

  • Reflects customers who don’t pay what they owe

    • I will be calculating this as well as an allowance for doubtful accounts based on Accounts Receivable 

17. Miscellaneous Expense

  • Minor costs that don’t fit into other categories

  • Typically small, irregular, or infrequent items