DorthyP
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An Administrative Expense is an expense relating to the administration of the company (the functioning of the company). Therefore, yes, Rent Expense is generally classified as one. Other examples of Administrative Expenses include utilities expenses, office expenses, and insurance expense.
Yes, Purchases and the Purchases Returns (and Allowances) both belong on the Income Statement. They are a part of the Cost of Goods Sold section, classified as Net Purchases. They go BEFORE the Gross Profit calculation.
Net Revenue - Cost of Goods Sold = Gross Profit
Gross Profit is calculated BEFORE your expenses. Freight-out is classified with your Operating Expenses (generally a Selling expense under this category).
When calculating your Purchases and Purchases Returns into the Cost of Goods Sold, this may help:
COST OF GOODS SOLD:
Beginning Inventory
Purchases
-Purchases Returns
-Purchases Discounts [if there are any]
+Freight (or Transportation) In
=Net Purchases
Goods Available for Sale (Beg. Inventory + Net Purchases)
-Ending Inventory
=COST OF GOODS SOLD
I hope this helps, just e-mail me if it's still a little confusing.
 Posted 538 days ago
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