Cost of Goods Sold

• To have complete records, you must know how much the business spent on merchandise for resale. Expenses for materials used to create products for resale are included in this category. The cost of goods purchased also includes any freight or shipping charges the business had to pay. Any merchandise or materials that were removed for personal use are deducted from beginning inventory and are not considered a business expense.
  
  

Payroll

• Payroll expenses include all amounts that were paid to employees. This includes the owners and anyone else in management who receives a paycheck. Benefits and other items such as workers' compensation premiums and income taxes paid on behalf of employees are included here. Occasional payments to someone who is not considered an employee, such as a contractor, are also listed as a payroll expense. The payroll section includes the payroll taxes that were deducted from each employee's pay. They are recorded in the payroll section but are not listed as an expense for the business.
  
  

General and Administrative Costs

• Any amounts spent to manage the daily activities of the business are listed here. Advertising costs, charity contributions, costs for laundry or uniforms, legal and accounting fees, license expenses, office supplies, postage, rent or mortgage payments and sales taxes paid are considered general and administrative expenses. Other expenses such as notes and loans payable fit this category but are not deducted as business expenses for income tax purposes.
  
  

Utility Costs

• Amounts paid for electricity and gas, garbage disposal, telephone and Internet charges, and water and septic services are placed in this section. Security and alarm services also fit this section. Cable television service may be included if a particular channel was required to provide essential classes or instruction. Utility deposits may also be included as an expense. If a deposit on any utility is returned, it is considered income.
  
  

Miscellaneous Expenses

• This section includes automotive expenses, maintenance and repairs and the costs of gas and insurance. Travel expenses such as plane or train fares and overnight hotel or motel accommodations are listed as business deductions. Lawn care and landscaping services can be listed here or as general and administrative costs. Any other necessary expenses paid by the business that aren't included elsewhere should be included in this category.