Please forgive this novice-level question... I'm a small business owner who has started to use bookkeeping software (FreeAgent) and looking for guidance on categorising expenses. Freeagent has a large list of categories and its most prominent one is this;
Particularly, I'm looking for guidance on when to categorise an expense as "Cost of Sales" vs "Materials". I have both a restaurant business and a separate landlord (letting) business. Can someone please advise what the following type of expenses would likely come under...?
For the restaurant:
For the landlord business:
Code | Description | Tax reporting type | Auto VAT rate |
101 | Cost of Sales | Purchases | Standard rate |
102 | Commission Paid | Commissions Payable | Standard rate |
103 | Materials | Purchases | Standard rate |
104 | Equipment Hire | Material Costs | Standard rate |
150 | Subcontractor Costs | Subcontractor Costs | Standard rate |
Particularly, I'm looking for guidance on when to categorise an expense as "Cost of Sales" vs "Materials". I have both a restaurant business and a separate landlord (letting) business. Can someone please advise what the following type of expenses would likely come under...?
For the restaurant:
- raw ingredients
- takeaway packaging
- plates and cutlery
- furniture (such as tables and chairs)
- kitchen/bar equipment
For the landlord business:
- factors fees
- tradesman invoices (eg. painter, electrician)
- furniture (such as beds and sofas)
- purchases for diy repairs (such as silicone, screws, wood, lights, extractors)
- purchases of equipment for the business (such as cameras, power tools, test equipment)