Meaning with Some Examples
An indirect expense is an expense incurred by a firm that is not directly related to the core business operations. To ensure the success of a business indirect expenses must be incurred, but they cannot be directly linked to the costs of its core product/service offering. In this article we try and provide a comprehensive indirect expenses list.
For example, the salary paid to sales and marketing employees by Toyota is an important expense for successful business operations, however, the cost of such expense may not directly relate to the cost of producing a car.
Indirect expenses are shown in the income statement (or) profit and loss account on the debit side.
Related Topic – Is Expense a Debit or Credit?
List of Indirect Expenses
Following is a list of some commonly seen indirect expenses;
- Salaries (Note – Wages are treated as a direct expense)
- Office Rent
- Office Electricity / Office Lighting
- Printing & Stationery
- Postage, Courier, Telephone & Telegram
- Freight on Sales / Freight Outward
- Carriage on Sales / Carriage Outward
- Delivery Vehicle Expenses
- Insurance Expenses / Insurance Premium (Note- Life Insurance Premium would be treated as drawings in case of a sole proprietary business)
- Interest on Loan
- Discount Allowed / Discount on Debtors
- Bad Debts / Further Bad Debts / Bad Debts written off
- Loss of Goods by Fire / Theft / Damage
- Miscellaneous Expenses / General Expenses
- Sundry Expenses
- Travelling Expenses
- Bank Charges
- Business Promotion Expenses
- Legal & Accounting Charges
- Rents, Rates & Taxes
- Repairs & Renewals
- Telephone Expenses
- Advertisement & Marketing
- Salesmen Commission
- Trade Expenses
- Packing & Store Supply Expenses
- Audit Fees
- Commission to Agents
- Utility Expenses
- Business & Administration Expenses
- Sales & Marketing Expenses
- Staff Welfare (including goods distributed among staff members for their welfare)
- Boxes & Labels
- Charity / Donation
- Distributive Expenses
- Establishment Expenses
- Export Duty
- Stable Expenses
- Keep car & Vans
- Maintenance Charges (provided these are not incurred on an asset at the time of its purchase)
- Entertainment Expenses
- Loss on Sale of an Asset
- Goods given as Free Samples
- Depletion Expense
- Freight & Carriage
- Provision for Bad Debts or Doubtful Debts or Discount on Debtors (at the time of creation, such provision is treated as an Indirect Expense)
- Fringe Benefits
- Quality & Testing Fee
We update the list periodically to reflect new indirect expenses used around the world.
Related Topic – Where are Trading Expenses shown in Final Accounts?
PDF for Download
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Short Quiz for Self-Evaluation
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>Related Long Quiz for Practice Quiz 23 – Direct and Indirect Expenses
>Read Process of preparing an income statement from the trial balance