Are finance charges the same as interest – If you want to know what financial expenses and how they divided, follow us through the following content, where we will address the types of financial expenses that you should know about and how to achieve control of these resources.
Content:
- What are the financial expenses?
- financial expenses accounting
- Bank fees
- Interest on loans or credits
- multi-currency operations
- dividend payment
- insurance premiums
- Expenses for update of provisions
- Expenses generated by loss of value of the asset
- How to calculate the financial expenses?
- Why should expenses be controlled?
- How to control these expenses?
What are the financial expenses?
A fundamental part of the administration of a company is knowing what expenses it are going to face. If we are clear about the financial expenses, then we will prepare ourselves and thus avoid any inconvenience.
Among the different types of financial expenses are operating ones, which are related to the sale of goods and services. This item includes salaries, advertising and the payment of rent for the place where the business is located.
There are also administrative costs. These are not directly related to the sale or production of goods or services; rather, they are expenses linked to the operation of the organization.
Another set of expenses to contemplate are the extraordinary ones, since they are generally unforeseen expenses that every business has, due to extraordinary situations.
Financial expenses another item of expenses to consider that must paid a lot of attention, since they those generated by obtaining a bank loan.
In addition, among the financial expenses are all interest expenses. These refer to what a third party earns for giving credit to a business or person, and are calculated based on an agreed percentage of the amount of money granted.
For example, all credit cards have a percentage of interest that is generated each month, depending on what has been spent. This can then be included in interest expenses or financial expenses.
Regarding banks, in addition, there are commissions: a type of financial expense that depends on the banking institution. These can be due to various reasons: such as late payments or the cancellation of a loan, among others.
Negative adjustments are generated when transactions with different currencies are also taken into account. Another type of expense is insurance premiums.
The foregoing encompasses what financial expenses are. You can identify them and learn more about them in the following section.
financial expenses accounting
Basically, we can consider that the financial expenses within your accounting are the following.
Bank fees
They are financial expenses that are paid to banks for opening or managing an account. It is important to consider the payment for the use of company credit cards, since with them daily operations can be financed, that is, the expenses. of our company.
In this way, most of the services that a bank provides to a company charge a certain percentage of interest. So, before opening an account or processing a credit card, it is very important to know the interest and commissions that the bank will charge.
Interest on loans or credits
Within this type of financial expense, the interest paid for loans or credits with financial institutions or banking organizations counts. From the moment the contract signed, the commitment was established that the company will pay a certain percentage of interest for the purpose of the loan. In this type of credit, monthly payments are the most common.
The amount of money that paid in interest expense will depend entirely on the amount of money that awarded. This is why we must know what the conditions are when requesting it and how much money from the loan is going to be used for payment.
multi-currency operations
Multi-currency operations are also among the most well-known financial expenses, which correspond to payments in foreign currencies received by companies. Here it must considered that a negative margin can given because the value of the currency in which it operating can change.
Are finance charges the same as interest
dividend payment
It refers to the expenses that come from profits and are granted to shareholders based on the growth that the company registers annually.
insurance premiums
The insurance premiums contracted by the company for facilities, products, vehicles, employees, etc., become a financial expense for the company.
Expenses for updating provisions
Financial expenses include the money that a company must set aside in order to cover any eventuality in an extraordinary situation.
Expenses generated by loss of value of the asset
Due to the passage of time, the machinery loses its value. Financial expenses also include the loss of value of the company’s assets.
