What are Sundry Expenses?
Sundry expenses, also are known as the miscellaneous expenses, are the expenses incurred by the company during the accounting period under consideration which is generally of the small value and is not as important to be mentioned individually in the separate ledger account and are thus clubbed together under one head.
In simple words, Sundry expenses are those expenses done in the regular course of business but are random. These comprise of a small number of expenses compared to the overall expenses of the business, relatively unimportant and insignificant. Such expenses are relatively small and infrequent and, as such, do not assign to Individual Ledger accountsLedger AccountsLedger in Accounting, also called the Second Book of Entry, is a book that summarizes all the journal entries in the form of debits & credits to use for future reference & create financial statements. but collectively classify as a group.
- In regular business, there are many petty expenses which incur for the smooth functioning of the business. However, these expenses are neither regular in nature nor significant in amount. Also, these expenses don’t fit into other standardized general ledger accounts such as Wages, Salaries, Advertisement, etc. to name a few.
- In order to record such expenses without increasing separate ledger accounts and administrative workload of the accounting department of an organization, such expenses are grouped and clubbed together under the group head “Sundry Expenses.” It may also be referred to as Miscellaneous Expenses.
- The word “Sundry” is items that are irrelevant and unimportant for mentioning individually. These expenses are unusual and random and don’t include a business expenseA Business ExpenseBusiness expenses are those incurred in order to successfully run, operate, and maintain a business. Travel & conveyance, salaries, rent, entertainment, telephone and internet expenses are all examples of business expenses., that is regular or capital in nature. These expenses may be related to a particular area of business and, in such cases, are clubbed as office Expense, Manufacturing expense, etc.
Sundry Expenses Examples
Let’s take an example to understand this concept in detail.
BL International is into the business of shoe manufacturing. The company incurs various expenses like Raw material, Rent, Advertising Cost, etc., which are regular expenses in its day to day operations. In one of the recently shipped orders of 1000 customized shoes for its client XYZ International, it was found at the time of delivery that an individual logo is not pasted on 200 customized shoes. The company spent $50 in purchasing individual logos and stick the same on the 200 customized shoes.
This $50 expense is Sundry Expenses. It’s not regular, and also it is a small amount. Hence, BL International classified the same under Miscellaneous Expenses.
It is important to note here that it varies from industry to industry, and there is no particular item that can be categorized, particularly under the head Sundry expense. The basic rule to keep in mind while classifying such expense:
- Random or Infrequent Expenditure
- Unusual in nature
- Must be a small amount
- Must not be of a regular nature
Sundry Expense vs. General Expense
Here are the critical differences between Sundry and General Expense
|Basis for comparison||Sundry Expense||General Expense|
|Meaning||It refers to any business expense which of random nature, a small amount, and cant be classified under any regular business expense.||It is the business expense of regular nature and an amount larger than the sundry expense.|
|Regularity||These are irregular.||These are regular.|
|Amount involved||Comprise of a small amount||Usually, the amount of general expense is good in quantum. Example: Salaries, Advertisement Cost, Raw material Cost|
How to Record it in the Financial Statements
We show this Expense under the head Income Statement. Since it is an expense, we show it on the debit side of the Income Statement.
|To Rent Expense||By Gross Profit b/d|
|To Salaries||By Income from Commission|
|To Sundry Expense|
|To Net Profit|
Journal Entry to Record a Sundry Expense
|To Cash/Bank Account||1000|
|(Journal Entry on Payment of Sundry Expense by Cash/Bank)|
|To Sundry Expense||1000|
|(Journal Entry on Transfer of Balance in Sundry Expense Account to Income Statement)|
Sundry Expenses are a regular business expense line item found in the Income Statement of all organizationIncome Statement Of All OrganizationThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.. Its purpose is to club together all irregular, infrequent, and random nature expenses that can’t be classified under any regular business expense head. These expenses are small in the denomination and not routine.
Classifying an expense as a Sundry expense is not a stand criterion as what constitutes it in one organization or industry may not be it in another. Thus whenever an expense is classified under this head, one should follow the thumb rule which states that:
- Expenses should be random or Infrequent.
- Should be unusual
- Must be a small amount
- Must not be of a regular nature
Unlike the General Business Expenses, which categorize under Regular Ledger Heads such as Salaries, Wages, etc., these expenses record within an account called Sundry Expenses. The purpose behind using this account is to save the time and energy of the accounting department in identifying the exact nature of these expenses and allocating them to other, more precisely defined accounts. However, it is pertinent to note that once any of the expenses classified under Sundry Expenses becomes regular and start occurring more frequently, they should move out of this head. And instead, report separately under their name that identifies the nature of the expense.
Sundry Expenses Video
This article has been a guide to what is Sundry Expense. Here we discuss its example and how to record it in the journal. We also discuss the critical differences between sundry and general expenses. You may learn more about accounting from the following articles –