Consumables – What are consumables?
In accounting, a consumable is a small, everyday item that is bought, ‘used up’, and then replaced. Consumables can also be referred to as ‘consumable goods’, ‘soft products’ or ‘non-durable products’.
When building a company, it is essential to keep track of your accounting and finances. Try Debitoor for free today.
We use consumables every day; for example, we consume food and water. In the same way, a business can consume goods. Within an office, consumable products such as paper, pens, highlighters, ink cartridges and Post-it notes are commonly ordered, used up and replaced. Within businesses, a small amount of these consumables are kept available for immediate use, referred to as ‘supplies on hand’.
Disposable products are an extreme case of consumable goods, as they are used up after a single use. Examples may include disposable towels, hygiene products or single-use batteries.
Consumable goods vs. durable goods
In contrast to consumables, durable goods (also known as capital goods) do not need to be purchased frequently as they are designed to last for a long time. Offices commonly possess many durable goods, such as furniture, computers or other business machines.
Investing in consumables
Online retailers can make large profits by selling consumables. In 2018, Amazon reported that its sales in consumables had topped $10 billion in 2018.
Investing in consumables is often considered a safe bet. During an economic slump, equity investors still consider it to be safe to invest in stocks of companies that make consumables. There is a simple explanation for this: people always need to purchase consumable items, regardless of the state of the economy.
Accounting for consumables
As a business, if you buy consumable goods, these need to be recorded on the balance sheet and can be referred to as ‘supplies on hand’. At the end of the financial year, the on-hand consumable supplies are counted and, using an adjusting entry, the amount used in that period is recorded as an expense in the income statement.
Consumable items therefore count towards the day-to-day running costs of a business, reducing its profit in the profit and loss account.
How to add consumable expenses with Debitoor invoicing software
It is essential that a business keeps track of its consumable expenses. Using Debitoor invoicing software, this is very simple. To record a new expense, click on ‘New expense’ in the Expenses tab. Fill in the appropriate details and attach an image of your receipt, confirmation email or invoice for your personal records. It is possible to save the supplier for easier expense creation if you expect to order consumables from the same supplier again.
With Debitoor invoicing software you can categorise your expenses and therefore maintain an overview of your consumable expenses. You can view your expenses by category and see a timeline graph that indicates your expenses over selected time periods.
To find out how to start organising your expenses, check out our tutorial about recording an expense in your Debitoor account.