Page 112 - DCOM409_CONTEMPORARY_ACCOUNTING

Unit 8: Corporate Reporting

3. Operating expenses: Operating expenses are those that are incurred in order to generate Notes
sales. Operating expenses shall be classified as:
(a) Selling and marketing expenses;

(b) Administrative expenses;
(c) Depreciation and amortization of assets;
(d) Foreign currency exchange gains/(losses), net.
(a) Selling and marketing expenses are those expenses that are directly related to the
company’s efforts to generate sales. These items shall include (to be disclosed
separately):

(i) Payroll costs of sales, marketing and distribution functions (ESOP and ESPP
expenses to be disclosed separately);
(ii) Advertising;

(iii) Sales persons’ travel and entertaining;
(iv) Warehouse costs for finished goods;
(v) Transport costs arising on the distribution of finished goods;
(vi) All costs of maintaining sales outlets;

(vii) Agents commission payable;
(viii) Other selling and marketing expenses.
(b) Administrative expenses are expenses related to the general administration of the
company’s operations. These items shall include (to be disclosed separately):
(i) Payroll costs of office and administrative staff (ESOP and ESPP expenses to be
disclosed separately);

(ii) All costs of maintaining the administration buildings;
(iii) Bad debts;
(iv) Professional costs;
(v) Amount paid to the auditor, whether as fees, expenses or otherwise for services

(vi) Directors remuneration;
(vii) Insurance expense;
(viii) Utilities expense;
(ix) Other administrative expenses.

(c) Depreciation and amortization of assets other than used in the production process and
included in cost of sales.
4. Other income: This shall include (to be disclosed separately):

(a) Interest income;
(b) Dividend income;
(c) Rental on investment properties;
(d) Increase (decrease) in carrying amounts of investments;

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