The process of recording expenses is an essential component of accurate bookkeeping for a firm; however, what should they do with the unusual ones that don’t fall into any of the categories?
The sundry account may be the most appropriate location for unplanned costs like this. Below, we will define miscellaneous and explain how becoming familiar with this catch-all term will assist you in more accurately classifying your more minor expenditures.
What Is A Sundry Account?
A general ledger account, or a sundry account, is an accounting instrument accountants use to record various expenses and debits that are not significant enough to warrant their unique transactions.
Postage, supplies, rent for the office space, and utilities are some examples of costs that fall under this category. When multiple more minor expenses do not fall within the scope of a particular account, it is common practice to establish a “sundries” account.
In most cases, the sundry account will be divided into many sub-accounts to ensure that accountants record the specific spending in a more precisely tracked manner. A miscellaneous account might have several sub-accounts for office supplies, postage, and utilities.
The primary purpose of these sub-accounts is to record the numerous expenses businesses keep track of in the various account more precisely and provide additional information about those expenses.
When an accounting period ends, the “Sundries” account is often closed, and accountants move the expenses to the accounts more accurately reflect their nature. Because of this, companies can maintain an orderly and effective system for monitoring the various costs they incur.
Origin of the Term “Sundry”
Sundry comes from the Middle English word “sundrie,” which comes from the Old French term “sondrei,” which means “different.” This term refers to a wide range of uncategorized or random objects. People can also use it to describe a small amount of anything.
The phrase is now most commonly used in corporate contexts, such as accounting and invoicing monitoring. For example, a company may buy various things listed under the broad category of “sundry.” It assists in tracking expenses and ensuring that the company is spending on all items.
“Sundry” refers to a single item or a collection of various goods. Businesses use it to describe several unrelated things in a single statement. The term is frequently employed when discussing goods that are difficult to categorize or separate.
For example, someone can characterize anything they bought as “a variety of products.” The items, in this case, are diverse and not necessarily related. Sundry is a broad term that can refer to a wide range of things or expenses. It is frequently used as a general term to refer to various products that are difficult to classify or describe.
Sundry Account in Business
When one business lends its name or intellectual creations to other companies that operate for profit, the first business may be eligible to obtain royalties from subsequent transactions. Record companies, big multi-national organizations that manufacture products, and service companies that offer individually owned franchises worldwide are examples of businesses that fall under this category.
Because the company did not directly produce or provide service to the customers or accounts that generated the income, accountants list these royalties as “various accounts.”
In most cases, businesses deposit the profits from the sale of a portion of a company’s real estate holdings into a separate account known as the miscellaneous account. Accountants then account for the sale of land, stocks, bonds and other investments as revenue for the miscellaneous account.
The meaning of the term “miscellaneous” is conveyed precisely by the word “sundry.” The result is that miscellaneous accounts typically list all sources of revenue accountants cannot classify into any other revenue categories.
Even though the word gives the impression that each revenue stream is relatively insignificant, a company might earn enormous amounts from various funds.
Sundry Expenses
Sundry expenses are small expenses incurred in the ordinary course of business. Postage, office supplies and stationery, minor repairs and maintenance, telecommunications bills, and might include other expenses.
Businesses must track sundry expenses because they can quickly build up and cut into profits. For companies to ensure that expenditures remain within an acceptable level, it is critical to categorize and monitor all incidental expenses and track them against planned quantities.
It is also critical to ensure that all incidental expenses are genuine and required for the regular operation of the business. Businesses may ensure that their overhead expenditures stay within control and risk their profitability by closely monitoring various expenses.
What Are Sundries?
These minor expenses occur randomly, which businesses do not incur frequently, and are typically odd in their character. These costs do not correspond to any other conventional accounts in the general ledger. Therefore, the accountant will construct a category called “various” and assign each cost to that category.
Another widespread use is sundry income, which refers to any sources of money that a firm has that are out of the usual and outside of conventional income categories, such as income from performing an essential service or selling a core product. Companies can use sundry income in a variety of contexts.
Given that the term “sundry” is intended to refer to a wide range of unrelated things, it might be challenging to define what it means precisely. What do we mean when discussing sundries? Accountants record expenses that don’t fit into any other category here, including those that are unusual, minor, or otherwise inconsequential.
Make sure that your staff records these smaller items in the general ledger by opening a miscellaneous account to record them. It will ensure that they appear in the income statement.
The following characteristics serve as a good definition of sundry:
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Rare or unusual expense
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Random, irregular timing
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A negligible amount
A miscellaneous expense does not arise very regularly and does not require a significant financial investment. You won’t notice a difference in how your company functions due to the cost, but establishing a sundry account will enable you to group these tiny, sporadic, and unrelated expenditures.
The term “sundry” can also be used to refer to income. If your company receives money from various sources besides its regular income streams, this is known as “sundry income.” The amount of revenue would need to be very low and unpredictable to qualify.
Examples of Sundry
To provide a more straightforward illustration of what constitutes a miscellaneous expense, the following are a few examples:
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A box containing replacement labels for a shipment of inventory
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Fee assessed by the bank for effecting a single money transfer
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Flowers for a friend and coworker’s retirement party
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A contribution to the charitable organization of a coworker
Businesses need to plan these expenses, and they need to fit into the usual expense accounts. A sundry account is a handy way to record various business expenses, particularly if your company does not already have a separate account for petty cash or for recording miscellaneous business expenses.
Sundry Expenses vs. General Expenses
There are several critical distinctions between sundry expenses and general expenses. When determining if an expense falls within the category of general or sundry, here are a few guidelines to keep in mind.
Sundry expenses:
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Not eligible for inclusion in the category of routine cost accounts
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Include one-time payments, donations, and gifts in the equation.
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They are erratic in terms of timing
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It involves only a minimal sum of money
General expenses:
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Are straightforward to categorize under standard spending accounts
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Consider factors like salaries, wages, the cost of marketing, and the cost of raw materials
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Maintain a schedule that is consistent and dependable
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Involve bigger sums
Characteristics of Sundry Expenses
A “sundries” column is useful only when used to account for expenses that are either too general or too insignificant. Miscellaneous expenditures vary depending on the business, its tolerance for unclassified financial statements, and the relative figures shown in the profit and loss statement (P&L).
Naturally, businesses consider a few hundred dollars a miscellaneous expense for a company that makes one hundred million dollars annually. However, it would be a considerable investment for a company that only makes a few thousand dollars a year in revenue.
Companies can use these three factors to determine which expenses they can consider sundry expenses.
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Rare
This kind of thing happens occasionally, and companies cannot anticipate it because it is isolated.
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Unusual
Accountants group all expenditures unique enough not to warrant their row on an accounting sheet under the umbrella term “sundry expenses.” However, as was just noted, what constitutes odd is highly subjective and relies on the type of company, the industry it operates in, and the size of the company.
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Irregular
The occurrence of sundry expenses is so sporadic and unpredictable that creating a separate line item for them is impossible. If a row on your balance sheet, for example, is only utilized once every seven to twelve months, adding those expenses to the miscellaneous column may make more sense than having a blank line item every month.
In most cases, although not often, any miscellaneous expense is insignificant. Accounting for them is vital because, over a fiscal year, even very negligible expenditures can mount up to a significant sum.
When accountants add all miscellaneous expenditures together, the outcome is a figure known as the “net various expense figure,” which they include in the income statement of the company. It keeps accountants from clogging up the statement with trivial charges incurred at random.
Recording Sundry Expenses in Business Accounting
Regardless of how infrequent or inconsequential, miscellaneous costs must be itemized and included in the company’s financial statements. When creating your general ledger or your profit and loss account, you can report miscellaneous expenses on the chart that represents your expenses.
If you run a small business, you can report them as a single-line item under expenses. However, if you run a more prominent firm, you may need to create a specific account in the ledger for miscellaneous expenses.
When creating financial statements with accounting software, you can establish a sundry account section to record and monitor the payment of miscellaneous costs. Instead of being labeled as sundries, several programs place them as “miscellaneous costs.”
If you group these little expenditures into a separate report, your accountant will not have to worry about assigning each incidental expense to its respective account. However, this is subject to change as time goes on.
Recording Sundry Expenses in Business Accounting Cont.
You shouldn’t let your guard down regarding your miscellaneous costs, even though each doesn’t seem like much on its own. Analyze your cost accounts now and then to spot emerging trends. Companies no longer consider it an uncommon occurrence if the same odds and ends keep turning up over and over again. In these circumstances, you must establish a new account to pay for the recurring cost.
The left side of the profit and loss (P&L) statement records the sundry expenses. Businesses must depict the journal entry for sundry costs as a credit to the cash or bank account to rectify the debit entry made in the ledger account,
However, due to the infrequency and insignificance of various expenses, keeping tabs on them and recording them can take time and effort. Especially if you run a small firm, you may find that totaling your miscellaneous expenditures over a lengthy period, such as a fiscal quarter or a year, consumes much of your time, resources, and energy.
If you are confident that you can assist businesses in accurately recording their various expenses, consider beginning an accounting business. You can locate the top accounting jobs to advance your career on platforms such as Upwork, which can also help you find those positions.
Sundry Income
An organization’s primary activity is not the only source of revenue it generates, so it is not surprising that some of that revenue comes from sources other than those listed above. It may include earnings from rental properties, sports camps, sales made by vending machines, or any other activity that is not directly related to the core business.
It is common to see supplementary income as secondary to the principal activity. One should anticipate that such payments will constitute a portion of an organization’s revenue. As a result of this, companies need to provide an accurate accounting of their miscellaneous income within their financial records.
They do it to guarantee that they document all income and expenses accurately and fairly, providing a more comprehensive picture of the organization’s overall financial performance. In addition, the activities that generate a particular source of income may cause that revenue to be subject to a distinct set of tax laws and regulations.
As a result, businesses need to know the relevant tax implications when accounting for various types of income. If companies follow proper accounting and management procedures, sundry income becomes a valuable source of additional revenue for enterprises.
Sundry Income Defined
Unlike the organization’s core revenue-generating business activity, a company generates sundry income from various other channels. It comprises all the company’s revenue that it doesn’t receive from selling its products or services.
The nature of a company’s secondary income is probably less predictable than the nature of the revenue it generates from its primary operations. It is because the associated activities are frequently sporadic, and businesses do not consider the sources of income they secure over the long term.
Sundry Income in Business
A company’s “sundry income” is a source of money that is not substantial and is typically insignificant compared to the income it generates through its operations. While miscellaneous income might not make up a significant portion of a company’s total revenue, this does not imply that the quantities are insignificant.
Because the distinguishing characteristic of miscellaneous income depends on the irregularity of the money source rather than the number of funds generated, there is no upper limit to the amount of income that can be considered sundry income.
Accountants may report sundry income as miscellaneous or other operating income on the income statement or the balance sheet. They can also refer to it as “other operating income.”
Businesses must also account for earnings from various sources in their financial statements and balance sheets since several types of revenue might influence a company’s overall value. They must disclose it to shareholders.
In addition, miscellaneous income could come with some tax ramifications that the company has to figure out and accommodate. The Internal Revenue Service (IRS) has regulations that businesses must abide by in order to record the funds alongside the regular income the business generates on a daily basis.
Examples of Sundry Income
Companies can include income from various sources in the “sundries” category, and the nature of these sources can change from one accounting period to the next. Depending on the type of business they conduct, many forms of income, such as late fees, royalties, profits from the sale of minor assets, or gains from currency exchange, may fall under the “sundry income.”
Whether or not a corporation has significant interest income due to considerable cash holdings determines whether or not it should include income from sources such as interest as part of its miscellaneous income. In these circumstances, businesses can present the interest income as a separate line item from the other forms of income.
Some common examples of sundry income are:
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Income derived from renting out a property, such as real estate or equipment
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Income gained through investments such as savings accounts, bonds, or other fixed-income products
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Gains from the sale of assets are the income gained from selling assets such as investments, real estate, or equipment at a higher price than what the corporation pays from its shareholders’ stock and other equity investments and then distributes to those shareholders.
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Earnings derived from intellectual property, such as patents, trademarks, and copyrights
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Income acquired from salespeople, brokers, and other professionals depends on the sales or deals they complete.
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Gains on foreign exchange refer to profits made by converting one country’s currency into another country’s currency and benefiting from favorable shifts in exchange rates.
Sundry Income in Profit and Loss Account
Accountants will show a credit for sundry income in an income statement, also known as a profit and loss statement. When a company generates revenue, its assets increase and its obligations are reduced.
When businesses realize earnings from various sources, they add them to the income statement. It results in a rise in the company’s revenue or income. It is a good sign for the organization because it indicates that the business is receiving more significant amounts of money than it is spending. Because of this, accountants show it as a credit on the account that records profits and losses.
For instance, if a company brings in a total of $13,000 in miscellaneous income, that amount would be reflected as a credit of $13,000 in the profit and loss account. As a result, the company’s sales would rise by that amount.
It is essential to realize that in the double-entry accounting system, every debit must have a corresponding credit to function correctly. Therefore, in addition to being recorded as a credit in one account, the miscellaneous revenue will be recorded as a debit in another account.
To keep the double entry system intact, if the miscellaneous income came from rent payments, accountants first subtracted that amount from the income statement’s rental income account. Then it will be credited to the various income accounts.
Sundry Account in Accounting Defined: Uses, Income & Expenses – Conclusion
In conclusion, sundry accounts are an instrument that is beneficial and required for enterprises. They are helpful in the accounting process and offer several advantages, including the ability to have more ordered accounts and improved accuracy through improved tracking of expenses.
Businesses can also use sundry accounts to track customer debts, making it easy to determine which customers have outstanding balances and need to make payments. Businesses can increase the accuracy of their ledgers and ensure that all records are correctly preserved and managed by utilizing various accounts, giving them greater flexibility.
Sundry Account in Accounting Defined: Uses, Income & Expenses – Further Readings
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Updated: 5/18/2023
