What account 9420 is for
Every company has people and expenses that neither produce nor sell, but without which it cannot work: the director, the accountant, the office rent. These are "management" expenses. They are part of neither the cost of products nor selling expenses, so they have their own account: 9420 "Administrative expenses".
Account type
In the chart of accounts, group 9400 is of type T (transit): under para. 3 of NAS No. 21, transit accounts are used during the reporting period and have no balance at the end of the period. 9420 is the second account of this group (para. 406).
What is recorded on the debit side
Under para. 409, 9420 records the expenses of running the company: pay of management staff, repair of fixed assets important for general management, rent of general-purpose buildings and other similar expenses. The main rows of the table in para. 412:
- pay expenses of management staff — Cr 6710 (row 5);
- depreciation of fixed assets of management significance — Cr 0211-0299 (row 6);
- rent for the management building — Cr 6910 (row 7);
- use of materials for management needs — Cr 1010-1090 (row 8);
- services of transport organisations — Cr 6010 (row 9);
- business trip and representation expenses — Cr 4220, 4230 (row 10);
- contributions for the upkeep of the legal entity's superior organisation and associations — Cr 6120 (row 11).
This account also has other rows that appear in other tables; those above are its main rows.
What is recorded on the credit side
At the end of the reporting period the balance of 9420 is closed to 9910 (para. 409; para. 412, row 25: Dr 9910 Cr 9410-9430).
What to watch out for
- Do not confuse it with 9410. The expenses of employees engaged in marketing are in 9410 (para. 407), while the pay of management staff is in 9420 (para. 412, row 5). Determine the employee's role from the job description (practical advice).
- Business trip documents. Business trip expenses correspond with 4220, 4230 (row 10); before posting, gather the advance report and the trip documents (practical advice).
- Post depreciation to the right account. Depreciation of equipment of management significance goes to 9420, that used in sales to 9410 (para. 412, rows 3 and 6).
Main journal entries 8
Debit and credit are as in the model table of Appendix 2 to NAS No. 21. The transaction text briefly restates the table row.
| Transaction | Debit | Credit | Source |
|---|---|---|---|
| Pay expenses of management staff | 9420 | 6710 | NAS No. 21, para. 412, row 5 |
| Depreciation of fixed assets of management significance | 9420 | 0211–0299 | NAS No. 21, para. 412, row 6 (in the table: 0211-0299) |
| Rent for the management building | 9420 | 6910 | NAS No. 21, para. 412, row 7 |
| Use of materials for management needs | 9420 | 1010–1090 | NAS No. 21, para. 412, row 8 |
| Services of transport organisations | 9420 | 6010 | NAS No. 21, para. 412, row 9 |
| Business trip and representation expenses | 9420 | 4220, 4230 | NAS No. 21, para. 412, row 10 |
| Contributions for the upkeep of the legal entity's superior organisation and associations | 9420 | 6120 | NAS No. 21, para. 412, row 11 |
| At the end of the reporting period the period expense accounts closed (9420 is included in this row) | 9910 | 9410–9430 | NAS No. 21, para. 412, row 25 |
Example
"Qo'qon Kabel" LLC (a fictional cable manufacturer) recorded the following management expenses during the month (amounts are for illustration only):
| No. | Transaction | Dr | Cr | Amount, soums |
|---|---|---|---|---|
| 1 | Pay expenses of management staff | 9420 | 6710 | 14,000,000 |
| 2 | Rent for the management building | 9420 | 6910 | 5,500,000 |
| 3 | Depreciation of management equipment | 9420 | 0211-0299 | 2,100,000 |
| 4 | Materials used for the office | 9420 | 1010-1090 | 900,000 |
| 5 | Business trip expense | 9420 | 4220 | 1,300,000 |
| 6 | Account 9420 closed at the end of the period | 9910 | 9420 | 23,800,000 |
Sources of the entries (para. 412): 1 — row 5; 2 — row 7; 3 — row 6; 4 — row 8; 5 — row 10 (4220 or 4230); 6 — row 25 (9910 — 9410-9430, the 9420 part of the row).
Calculation for 9420:
| Indicator | Amount, soums |
|---|---|
| Debit turnover (1–5) | 14,000,000 + 5,500,000 + 2,100,000 + 900,000 + 1,300,000 = 23,800,000 |
| Credit turnover (6) | 23,800,000 |
| Balance | 0 |
At the end of the period the account balance is zero (example prepared by the author).