Which of the following expense accounts is associated with natural resources? ?

Depletion expense is a charge against profits for the use of natural resources. The depletion concept is most commonly used in the mining, timber, and oil and gas industries, where exploration and development costs are capitalized, and depletion is needed as a logical system for charging these costs to expense. The concept differs from depreciation, where the calculation is based on a fixed usage period. With depletion, there is no fixed usage period; instead, the usage level could vary substantially from period to period.

How to Calculate Depletion Expense

The calculation of depletion expense is to multiply the number of consumed units of the natural resources by the cost per unit. The cost per unit is derived by aggregating the total cost to purchase, explore for, and develop the natural resources, divided by the total number of units expected to be extracted.

Example of Depletion Expense

A coal mining firm has purchased mineral rights for $10,000,000 and spent an additional $2,000,000 to develop the property. The firm expects to extract 500,000 tons of coal. Based on this information, the depletion rate will be $12,000,000 divided by 500,000 tons, or $24 per ton. In the most recent period, the company extracted 1,000 tons, for which the related depletion expense is $24,000.

The cost of a natural resource (less expected residual value) is divided by the estimated units in the resource deposit; the resulting amount is depletion per unit. If all of the resources extracted during a period are sold, then depletion expense equals depletion per unit times the number of units extracted and sold. If a portion of the extracted resources are unsold resources, then their cost (i.e., number of inventory units times depletion per unit) should be carried on the balance sheet as inventory.

Assume that a mine site is purchased for $9,000,000, and another $3,000,000 is spent on developing the site for production. Assume the site is estimated to contain 5,000,000 tons of the targeted ore. At completion of the operation, the site will be water flooded and sold as a recreational lake site for an estimated $2,000,000. The depletion rate is $2 per ton, as the following calculations show:

If 1,000,000 tons of ore are extracted in a particular year, the assigned cost would be $2,000,000. But where does that cost go? If 750,000 tons are sold and the other 250,000 tons are simply held in inventory of extracted material, then $1,500,000 would go to cost of goods sold and the other $500,000 would go to the balance sheet as inventory. A representative entry follows:

Equipment Used To Extract Natural Resources

Property, plant, and equipment used to extract natural resources must be depreciated over its useful life. Sometimes the useful life of such PP&E is tied directly to the natural resource life, even though its actual physical life is much longer. For example, if a train track is built into a mine, the track is of no use once the mine closes (even though it could theoretically still carry a train for a much longer period). As a result, the track would be depreciated over the life of the mine. Conversely, the train that runs on the track can be relocated and used elsewhere; as such it would likely be depreciated over the life of the train rather than the life of the mine.

Did you learn?What types of assets are considered to be natural resources?Define the term “depletion.”Prepare depletion calculations and the related journal entries.Distinguish between depletion that is charged to expense versus reported as an asset on the balance sheet.Know how to account for depreciable assets used in conjunction with natural resource extraction.

For Travel Reimbursements, Entertainment Reimbursements, Moving & Relocation, & Disbursement Vouchers

Whether you are submitting an entertainment reimbursement (ENT), travel reimbursement (TR), or disbursement voucher (DV), you will need to send your supporting documentation to be scanned. The guide below will help you determine what receipts, invoices, or proofs of payment you need to submit to be reimbursed in a timely manner.

Reimbursements will not normally be allowed for purchases made by gift card, reward points, prepaid vendor-specific cards (copy card, phone cards, etc.), gift certificates, etc. If proof of payment of the non-cash method can be provided, such as the receipt for a gift card purchase that can be included in the request to supplement the other receipts.  Reimbursements will not be made for travel reserved using points earned under airline, hotel or car rental loyalty programs, or a transportation/hospitality company credit.

Common Types of Supporting Documentation

The most common types of supporting documents are receipts, invoices, and proofs of payment. Here's the information that should be included on each:

Itemized Receipt

Invoice

Proof of Payment

An original document from the merchant showing:

• Merchant's name
• Transaction date
• Amount paid
• Description of purchased item(s)
• Description of additional charges (taxes, service, delivery, etc.)
• Form of payment used

An original document from the merchant showing:

• Merchant's name
• Invoice date
• Amount billed
• Description of billed item(s)
• Description of additional charges (taxes, service, delivery, etc.)

Often needed in tandem with an invoice. The following are acceptable proofs of payment:

• Credit card sales slip
• Monthly credit card statement (when you don't have a receipt and the purchase was made with a personal credit card)
• Check - photocopy of a cancelled check (front and back)
• Airline receipt or itinerary showing traveler name, flight information, ticket number, airfare amount and form of payment
• Lodging itemized receipt showing daily expenses and form of payment
• Rental car receipt given upon car rental return (mileage in/out) and form of payment
• Anything over $75 requires a receipt
• Protect your traveler's personal information.  Before sending documents to scanning, please remove/redact the following data:
  • Social Security number (SSN)
  • Drivers’ license number or State-issued identification card
  • Passport number
  • Credit card number or debit card number in combination with any required security code, access code, or password

Determining if Supporting Documents Need to be Scanned

The table below lists common types of electronic financial documents (eDocs) that can be created in the Kuali Financial System and
indicates whether supporting documents need to be scanned for each.

Type of KFS eDoc

How to Handle Supporting Documents

Disbursement Vouchers (DV)

Supporting Documents must be submitted with DV. Select one of the three options in the e-document's Image Scanning tab to attach your supporting documentation. See instructions in next section for details.

Travel Reimbursements (TR) and Entertainment Reimbursements (ENT)

Supporting Documents must be submitted with TR or ENT. Select one of the three options in the e-document's Image Scanning tab to attach your supporting documentation. See instructions in next section for details.

Purchase Requisition (REQS)

Supporting documents should be electronically attached as a PDF (5 MB max) in the notes and attachments section of the requisition. Do not send documents to scanning.

Purchase Order (PO)

Supporting documents should be electronically attached as a PDF (5 MB max) in the notes and attachments section of the requisition. Do not send documents to scanning.

PALCard Document (PCDO)

Keep supporting documents in your department. Do not send to scanning.

Uploading Supporting Documents with the Image Scanning Tab

The Image Scanning tab in DV, PREQ, and TEM documents includes three sub-tabs for handling supporting documents. You can use one or any combination of these options:

You can use this option to directly upload images of your supporting documents to FileNet. This is the fastest and most reliable way to attach supporting documents to your reimbursement. Here are some tips:

• • You cannot upload files until the KFS document has been saved or submitted.
  • Make sure that sensitive or personal data is redacted. Files cannot be deleted after they are uploaded.
  • Scan or photograph your documents into one of the following file formats: .pdf, .jpg, .jpeg, .bmp, .png, .tiff, or .tif.
  • Go to the Image Scanning tab and click the Browse button to select the image from your computer.
  • Click the Upload File button to upload your image to FileNet. No coversheet is needed.
  • The Notes and Attachments Tab should never be used to upload items to a TEM or DV e-document.

• Link to Scan Document

If your supporting documents were scanned into a TEM or DV e-document that was subsequently disapproved, link that disapproved eDoc to the new one. Enter the document number of the disapproved document into the field in this section. Note: You cannot link DVs to TEM e-documents and vice versa. Linked e-documents must be from the same module.

Viewing Supporting Documents

After images are in FileNet, check them for quality and clarity. Images are accessible in FileNet as soon as they are uploaded. Image files appear as a single image page.

If you have difficulty scanning or photographing your documents into a digital format, you should contact the OIT Help Desk or seek technical help from your unit. If you encounter an error while uploading the file, contact the KFS Help Desk and include a screenshot of the error message. Documents that are in the Awaiting Scanning route log node and have images uploaded will advance in workflow only at preset batch processing times (afternoon and overnight). 

Retention of Documents Uploaded to FileNet

Receipts and other supporting documents uploaded to FileNet are considered original documents and will be retained in compliance with UCOP Document Retention Policies. According to UC policy, each department is the office of record for its supporting documents. It is therefore the responsibility of the department to determine whether storage of original documents on FileNet is sufficient to ensure compliance or if paper records should also be retained locally. At minimum, the Accounting Department recommends retaining supporting documents until the KFS document is final, has hit the ledger, is paid out, and has been reconciled.

See the Document Retention for Accounting Guide for more information.

Required Supporting Documents by Expense Type

For each of the types of expense listed in the table below, you will need to send the indicated support documents to Document Services to be scanned or upload items to the Image Scanning tab. These documents are needed for Accounts Payable staff to insure compliance with university policies and for various auditors to conduct their audits. If you don't have a required document, you will need to get exceptional approval. Also, keep in mind that your department may have more stringent receipt requirements than those shown in the following table.

Travel and Event Management

Expense Type

KFS eDoc Type

Required Supporting Documentation

Other Considerations

Travel Expenses

Travel Reimbursement (TR)

Itemized receipts with proof of payment are required for the following:

• Airfare: must include the ticket number
• Lodging: hotel folios or similar receipt with dates of stay, room charge, and taxes
• Car Rental: must include rental agreement number, total charge, and miles in/out
• Any other expenses that exceed $75 

• Business Purpose/Agendas: The business purpose of a trip must be clearly indicated in the Travel Reimbursement. An agenda is the preferred way to document the business purpose. If an agenda is not readily available or contains sensitive information, please detail the nature of the trip in the Business Purpose section of the reimbursement, e.g. that the trip was for a University-wide meeting of functional offices, location-based meeting of deans and directors, extended formal training session, meeting of a University-appointed committees, or a meeting of a professional association or other external organization. Failure to clearly indicate the business purpose of a trip is an audit risk for UCI and is impermissible under UC policy as it would result in the reimbursement becoming subject to income taxes.
• Package Deals: No package deals unless they are itemized for every expense: air, car, and hotel.
• For foreign nationals: The following completed forms must be attached to the check request:
  • Copy of passport
  • Copy of I-94 stamp on visa
  • Certification of Academic Activity

Business Meetings or Entertainment

Entertainment Reimbursement (ENT)

• For reimbursements to employees of $75 or more, include either an itemized receipt or an invoice with proof of payment. Include guest full names, business affiliation and purpose of the meeting, when meals are involved.
• For payments to merchants, include an invoice or itemized receipt.
• For facility or room rentals, a rental agreement including a certificate of insurance and a signature from the purchasing department is required.

• All entertainment reimbursements require a clear description in the notes section of the ENT eDoc stating why the expense was necessary to complete university business.
• The description in the notes section should be corroborated by supporting documents such as an agenda, conference pamphlet, or other form indicating the date and location of the event.

Moving, Relocation and House Hunting

Moving & Relocation

• Offer Letter
• Exceptional Approval Letter for Academic Appointments only.
• Relocation Expense Form
• Relocation Tax Agreement
• Itemized receipt or an invoice with proof of payment.
• Airfare: must include the ticket number.
• Lodging: must include the hotel folio or similar receipt with dates of stay, room charge and taxes.

• Household, personal items and other eligible moving costs are only reimbursed at 50% for Academic appointments.
• The department may agree to pay 100% of these costs which will require an exceptional approval letter:
  • Academic Appointees: signed by the Office of the Provost and Executive Vice Chancellor.

Disbursement Vouchers

Expense Type

KFS eDoc Type

Required Supporting Documentation

Other Considerations

Honoraria

Disbursement Voucher (DV) with reason code E

• A letter of invitation to the individual including the date of the event and amount being offered.
• A flyer of the event.
• For foreign individuals receiving an honoraria the following is required:
  • Copy of the Passport
  • Completed Glacier Information Form
  • Copy of I-94 (front and back)
  • Visa Sticker/Stamp (in Passport)
  • Certification of Academic Activity Form

• ALL payments under this category require additional approval from the dean or designated approver.

Membership, Subscriptions, and Dues

Disbursement Voucher (DV) with reason code I

• For payments to merchants, include an application showing the amount to be paid or an invoice.
• For reimbursements to employees, include an application or invoice from the merchant with proof of payment.

• PALCard is the preferred method of payment.
• Information about PALCard is available at: www.PALCard.uci.edu

Gifts and Non-Cash Awards

Disbursement Voucher (DV) with reason code U

• For reimbursements to employees, include an itemized receipt with proof of payment and recipient name list with full names.

Payment to Research Participants

Disbursement Voucher (DV) with reason code C

• Include a copy of the IRB showing the expiration date and a signed participant acknowledgement / statement form.
• If it has been determined an IRB is not required please provide the determination letter that IRB is not required.
• A completed Certification of Payment to Anonymous Persons form is required to reimburse an employee who has used personal funds.

• Please do not include Social Security numbers.
• A reimbursement made payable to the employee for the total amount to be reimbursed, should be approved by the PI (if employee is the PI, chair or dean need to approve).
• Link to policy: http://www.policies.uci.edu/policies/procs/701-03.php

Registration Fees (Not Travel Related)

Disbursement Voucher (DV) with reason code L

• For payments to merchants, include an invoice or registration application form.
• For reimbursements to employees, include an invoice or an application with proof of payment.

•  PALCard is the preferred method of payment.

Supplies and Materials (No Food or Travel)

Disbursement Voucher (DV) with reason code B

NOTE: PALCard or Purchase Order (PO) are  the preferred methods of payment

• For reimbursements to employees, include an itemized receipt or an invoice with proof of payment.
• A Payee Certification must be signed by the payee and submitted to scanning with supporting documentation.

• PALCard is the preferred method of payment.
• A thorough description of the items purchased is required in the notes section for all out of pocket reimbursements.
• An explanation of why this purchase was not made through proper purchasing methods and the urgent need for the purchase MUST be included in the Explanation.
• For purchases of more than $500 the document must be adhoc routed to Snehal Bhatt, Director of Purchasing and Risk Services, for approval. Please be sure that all department approvals have gone through before routing. The accounting reviewer will need to adhoc route the document.
• Supplies purchased for a specific event need to be processed on an Entertainment Reimbursement document and related to any other ENT documents for that event.

Fees and Employee Tuition

Disbursement Voucher (DV) with reason code P

Program Sponsorships

Disbursement Voucher (DV) with reason code Q

• A letter, email or invoice from the organization requesting UC's support and a description of what UC will be supporting.
• Transmittal letter on University or UCI Medical Center letterhead to the vendor must include:
  • Statement that the contribution/donation is made "on behalf of UC"
  • Name and title or occupation of the recipient must be included on the letter
  • Business justification describing how UC will benefit from making the contribution/donation
  • Amount of sponsorship or donation
• Example Transmittal Letter

• Support, Sponsor, or contribute to a specific function - such as a conference or educational/research related study.
• Payments must be paid directly to the vendor only (never as an out of pocket reimbursement).
• ALL payments under this category require exceptional approval.
• Payments under this selection may be tax reportable unless the payee is a corporation.

Have more questions about supporting documentation?

For assistance with any of the above information, please contact Accounts Payable at [email protected].