ACCOUNTING

Direct expenses means all expenses directly connected with the

manufacture, purchase of goods, and bringing them to the point of sale. Direct
expenses include carriage inwards, freight inwards, wages, factory lighting, coal,
water and fuel, royalty on production, etc.
Examples of direct expenses

Direct Expenses (General)

1. Wages, Freight and Carriage
3. Manufacturing Expenses
4. Factory Lighting
5. Factory Rent
6. Factory Insurance
7. Gas, Water and Fuel

8. Cargo Expenses ಸರಕು ವೆಚ್ಚ ಗಳು

9. Import Duty
10. Shipping Expenses
11. Dock Dues
12. Octroi
13. Motive Power
14. Clearing Charges
15. Custom Charges
16. Coal, Oil, and Grease
17. Overhaul of Machinery
18. Repairs of Machinery

19. Upkeep and Maintenance.

2. Loading and Unloading Service Industry In the service industry, some

commonly seen direct expenses are: 1. Salaries to professionals who
ACCOUNTING

provide the services. 2. Amounts paid to other freelancers and part-

timers. 3. Other costs of rendering services, e.g. Fuel & Gas, etc.

3. Construction Industry In the construction industry, some commonly

seen direct expenses are: 1. Construction Material costs 2. Labour
costs 3. Equipment 4. Subcontracting fees

1.1 INDIRECT EXPENSES MEANING

Indirect Expenses are those expenses that cannot be assigned directly to any
activity since these are completely incurred while operating a business or as a
part of a business, examples of which include business permits, rent, office
expenses, telephone bills, depreciation, audit, and legal fees.

Below are examples of Indirect Expenses –

 Depreciation Expenses
 Rent Expenses
 Taxes
 Insurance
 Advertising Expenses
 Salaries to Management
 Commission paid to Agents
 Telephone Bills
 Audit Fees
 Legal Fees

1.1.1 Types of Indirect Expenses

It classifies into three types-
ACCOUNTING

 Factory Expenses – Expenses incurred at the production time are labeled as

factory expenses. Works overhead and factory overheads are also the
other terms for indirect expenses. Examples- Depreciation charged on
buildings, plants, and machinery, rent, and taxes, insurance, indirect labor
wages, expenditure on indirect raw materials, etc.;
 Administrative Expenses – Expenses incurred towards administration
activities are labeled administrative expenses. Examples- Salaries, office rent,
repairs and maintenance, electricity bills, office insurance, stationery and
printing expenses,depreciation of furniture, etc.;
 Selling and Distribution Expenses – Expenses incurred by the sales team
are selling expenses. In contrast, the expenses incurred from when a
product attains its completion status until it reaches its destination are
regarded as distribution expenses. Examples- advertisement expenses,
salaries of sales personnel, commission paid to agents, discounts given to
customers, etc.

 Assets: Resources owned by a business that have economic value you can
convert into cash (e.g., land, equipment, cash, vehicles)
 Expenses: Costs that occur during business operations (e.g., wages, supplies)
 Liabilities: Amounts owed to another person or business (e.g., accounts
payable)
 Equity: Your assets minus your liabilities
 Income and revenue: Cash earned from sales