What are sundry expenses?
There are a number of expenses to account for when running your own business; some of these will be large and easy to identify, but some naturally smaller and harder to classify. Sundry expenses encompass the smaller, irregular expenses that may not be attributable to a specific cost account that you have set up within your accounting systems.
The two main criteria attributed to ‘sundry’, or ‘miscellaneous expenses’, are that firstly the value of the expense is minimal, and secondly the expense type is rare in occurrence. Should an expense be for a greater value, be incurred on a regular basis, or not be easily classed as miscellaneous in nature, the expense must be assigned to a specific cost code within the businesses’ accounts. With that definition being the case, consistent operating expenditure (for example rent/lease payments, or non-cash expenses such as depreciation) cannot be classed as expenses of a sundry nature as they do not fulfil that criteria. Whilst smaller, infrequent, expenditure incurred such as office flowers, or a one-off bank charge for instance, would fit the definition of sundry.
It is worth noting that due to the nature of sundry expenses, they can and will vary dependent on the size of a business as well as which the market that they operate in; one business may class an expense as sundry, whereas another business may have a separate cost code for that particular expense. A small business, for example, that does not typically travel for work purposes may class a parking ticket as a sundry expense as it is an irregular, small expense. Conversely however, a coach business that provides private travel would class any parking charges as an operating expense as naturally this expense would be incurred on a regular basis due to the nature of their business.
How to record your sundry expenses in accounting
Sundry costs will appear in the Statement of Profit & Loss (SoPL) as they are an ‘outflow of economic benefit’ (in simple terms- all expenses are included within the SoPL), and therefore reduce overall business profits. Sundry expenses may also be shown as ‘Miscellaneous expenses’ and if that is the case don’t worry, though your accounting software may display them under a different name, these expenses are the same in nature and treated the same within your accounts.
It is important that you as a business owner are aware and comfortable with allocating the expenses your business incurs to the correct code; though the ‘Sundry/Miscellaneous’ code will exist within your accounting platform, it is ultimately your business’ responsibility to allocate the incurred costs correctly to each cost code, which in turn will then ensure that the business’ profit and loss statement is an accurate reflection of the activity of the business.
What is the benefit of including such a small expense within the accounts?
Although sundry expenses are somewhat of an anomaly within the accounts, they do offer relief in a couple of ways:
- As sundry expenses are an allowable expense (for more information on what an allowable expense is, please refer to our ‘What are allowable and disallowable expenses’ blog post), they can reduce the quarterly VAT liability for your business if it is VAT registered, and VAT has been incurred on the sundry expense. If you do reclaim VAT on the sundry expense though, please ensure that this is evidenced by a receipt.
- As the sundry expense has been incurred for business purposes, it is fully allowable against tax (be that corporation tax or personal income tax- dependent on your trading status) and therefore as reduces your profits, will in turn reduce your tax bill by including within the accounts.
- In short, not only is it technically correct to include all appropriate business expenditure within the accounts so as to an accurate reflection of business performance, but by including these expenses (no matter how small) within the accounts, it does ultimately save you/your business money and that is important- no matter how little it is, it adds up!
What is sundry income?
On the same principle of expenditure, a business may also receive sundry income (also referred to as ‘Miscellaneous Income’) throughout the year. A simple definition of sundry income would be any source of income obtained through activities outside the normal function of the business. We have listed a few examples below, but remember that what may be able to be classed as sundry income for your business, could be completely different for another:
- Late Payment Fees (charged to your customers)
- Royalties
- Profits on sales of minor assets
- Foreign Exchange Gains
Despite sundry income not contributing large amounts to overall income (as if it did, it would have it’s own ‘income code’ within the accounts), it is again important to include within the business’ accounts. To ensure the completeness of the accounts themselves, these types of income should be displayed within the statement of Profit and Loss as a gain, therefore increasing overall profits.
In the same vein that expenses of a sundry nature offer reliefs with regards to VAT, sundry income may also have VAT implications for the business (i.e. you may need to be pay over VAT on the income), dependent on your VAT status and the type of income received.
Conclusion
The fundamental point to take away from this post is that sundry expenses are small costs, infrequent in their nature, and difficult to allocate. Despite the fact that sundry transactions are very normally for a negligible amount, both sundry income and expenditure impact the net worth of the business, and therefore it is vital that they are included within your accounts to provide a true and fair reflection of the business.
Sundry expenses can prove tricky for all the reasons listed above, and this of course can present a challenge to ensure they are all included. However, we hope now that with this blog post you have a much better understanding of how to account for these transactions, and of course please do get in touch with one of our team if you’d like to discuss any aspect of the above.