Can you share a list of direct and indirect expenses?

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Ahuja Sahil
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-This question was submitted by a user and answered by a volunteer of our choice.

Direct and Indirect expenses-

Direct expenses include all those expenses which have a direct connection with the manufacture of the goods (i.e., conversion of raw materials into finished products). Such expenses are direct expenses and are placed on the debit side of the trading account. These expenses are also called as manufacturing expenses.

Indirect expenses include all those expenses that are incurred to run business activities. These expenses have no direct connection with the manufacturing of goods. Such expenses are indirect expenses and are placed on the debit side of the profit & loss account. These expenses are also known as office expenses.

Difference between Direct Expenses and Indirect Expenses

The following are the differences between Direct Expenses and Indirect Expenses:

  1. Direct Expenses:
    • Direct expenses are specifically tied to the production of goods or services.
    • They can be directly allocated to a particular product, service, or department.
    • Examples include raw materials, direct labor, manufacturing supplies, and shipping costs for goods sold.
    • Direct expenses vary with the level of production or output; as production increases, direct expenses also increase.
  2. Indirect Expenses:
    • Indirect expenses are not directly associated with the production of goods or services but are necessary for the overall operation of the business.
    • They are often incurred for the benefit of multiple departments or the entire organization.
    • Examples include rent, utilities, administrative salaries, depreciation, and insurance.
    • Indirect expenses typically remain relatively constant regardless of the level of production or output.

List of Direct & Indirect Expenses

The following are the Direct Expenses and Indirect Expenses:

S.no Direct Expenses Indirect Expenses
1. Wages Office rent, rates and taxes
2. Freight and Carriage  Salaries
3. Manufacturing Expenses Legal Charges
4. Factory Lighting Audit Fees
5. Factory Rent Advertisement Expenses
6. Factory Insurance Commission Paid
7. Gas, Water and Fuel Discount Allowed
8. Cargo Expenses Depreciation
9. Import Duty Bank Charges
10. Shipping Expenses Printing and Stationery
11. Dock Dues Travelling Expenses
12. Octroi Salesmen Salaries
13. Depreciation on machinery Warehouse Insurance
14. Motive power Delivery Van Expenses
15. Clearing charges Packing Charges
16. Custom Charges Carriage Outwards
17. Coal, Oil and Grease Premises Rent
18. Overhaul of Machinery Brokerage Charges
19. Repairs on Machinery Postage and Cartage
20. Upkeep and Maintenance Selling Expenses

 

Conclusion

Direct expenses are directly related to the production process and can be allocated to specific products or services, while indirect expenses are more general and support the overall operation of the business.

>Related Long Quiz for Practice Quiz 23 – Direct and Indirect Expenses