Conceptual Framework and Accounting Standards 1

Expense
Administrative expense
these are expenses related to general or administering cost

Selling expense (Distribution Cost)

these are expenses related to marketing and delivery cost

Finance Cost
these are expenses related to finance charges on borrowings

Other Expense
these are expenses not classified as administrative, selling and finance cost
Conceptual Framework and Accounting Standards 1

Examples
Administrative expense Selling expense
Doubtful accounts Salesmen’s salaries
Office Salaries Sales commissions
Expense of executives Traveling and marketing expense
Expense of general accounting Advertising expense
Office supplies used Freight-out
Depreciation of office building & equipment Depreciation of delivery equipment and
Amortization of intangible assets store equipment
Taxes and licenses Store supplies

Finance cost Other expense

Interest expense on bank loan
Interest expense of bonds payable
Loss on sales of trading investments
Loss on disposal of PPEs
Loss on disposal of Intangible assets
Loss on sale of noncurrent investment
Casualty losses
Net Profit
this is when total income exceeds
total expenses of the business

Net Loss
this is when total expense exceeds
total income of the business
Conceptual Framework and Accounting Standards 1

Forms of Income Statement

PAS 1, paragraph 99, provides that an entity shall present an
analysis of expense recognized in profit or loss using a classification
based on either the function of expense or their nature within the
entity, whichever provides information that is reliable and more
relevant
A. Functional Form - classifies expense according to
their function (known as Cost of Goods Sold method)
B. Natural Form - classifies expense according to their
nature
Statement of Changes in Equity
it shows the movements of equity items, equity items across a sole
proprietorship or partnership or a corporation or other forms of business