Question

Difference Between Direct and Indirect Expenses

Answer 1

Answer:

Direct Expenses

it is an expense that is related to the purchase of products.

Direct expenses would refer to anything that is related to what you have bought.

Examples→Fuel, Freight, Carriage Inwards

Indirect Expanses

These are the costs incurred in the daily operation of a business. They are not related to the sold products.

for example→rent and utilities

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Answer 2

Direct Expenses

(I) Direct expenses are those which are directly related to the purchase /production of goods or rendering services.

(II) These expenses are shown on the debit side of the trading account.

(III) These expenses are identified to calculate gross profit.

(IV) These expenses may differ according to the type of business concern such as manufacturing, trading or service, etc.

(V) These expenses can be allocated to a product or department

(VI) Examples: purchase cost of raw material, wages paid to factory workers, factory rent, etc.

Indirect Expenses

(I) Indirect expenses are those which are not directly related to the purchase/production of goods or rendering services.

(II) These expenses are shown on the debit side of profit and loss account or income statement.

(III) These expenses are identified to calculate the net profit.

(IV) These expenses may also differ according to the type of business concern such as manufacturing, trading or service, etc.

(V) These expenses cannot be allocated to a specific product or department and are shared among different products or departments.

(VI) Examples; Printing and stationery, legal fee, accounting and auditing fee, miscellaneous expenses, etc.