Importance of Expense Accounts
Within the Turkish Uniform Chart of Accounts (TDHP), the correct operation of expense accounts is essential for ensuring the reliability of financial statements. Particularly with the 7/A option, production and operating expenses play a critical role in calculating costs accurately and determining the company’s profit or loss for the period.
General Structure of Expense Accounts
- Group 7 accounts: Record only expenses.
- Group 6 accounts: Include both income and expenses, as well as profits and losses.
- Year-end process: Expenses accumulated in Group 7 are transferred to Group 6 through reflection accounts, ensuring that the profit/loss for the period is correctly determined.
Expense Accounts Used During the Period
Throughout the fiscal year, expenses are recorded on the debit side of Group 7 accounts:
- 710 Direct Raw Materials and Supplies Expenses
- 720 Direct Labor Expenses
- 730 General Production Expenses
- 740 Service Production Cost
- 750 Research and Development Expenses
- 760 Marketing, Sales, and Distribution Expenses
- 770 General Administrative Expenses
- 780 Financial Expenses
Interim Period Transfers
For interim reporting, expenses in Group 7 are transferred to Group 6 via reflection accounts:
- 760 → 631 (via 761)
- 770 → 632 (via 771)
- 780 → 660 (via 781)
📌 Example (for 770):
632 General Administrative Expenses XXX
771 Reflection of General Administrative Expenses XXXYear-End Closing
- 710, 720, 730: Transferred to 151, then 152, and finally reflected in 621 upon sales.
- 740: Transferred to 622.
- 750: Transferred to 630.
- 760, 770, 780: Already reflected in Group 6 during the interim period; closed at year-end.
📌 Example (for 770):
771 Reflection of General Administrative Expenses XXX
770 General Administrative Expenses XXXExpense Accounts Process Overview Table
| Account | Interim Period Process | Year-End Closing | Final Result |
|---|---|---|---|
| 710, 720, 730 | 151 → 152 → 621 | Group 7 closed | 621 Cost of Goods Sold |
| 740 | Transferred to 622 | 622 closed | Income Statement |
| 750 | Transferred to 630 | 630 closed | Income Statement |
| 760 | 631 / 761 | 761 / 760 | 631 Marketing, Sales & Distribution Exp. |
| 770 | 632 / 771 | 771 / 770 | 632 General Administrative Exp. |
| 780 | 660 / 781 | 781 / 780 | 660 Financial Expenses |
Why Correct Operation of Expense Accounts Matters
This system ensures that:
- Group 7 accounts collect only expenses.
- Group 6 accounts combine all income, expenses, profits, and losses.
- Period-end profit/loss is calculated accurately.
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