Difference between office expense and factory expense
Answers
Answer:
1. In short, a direct expense is an expense that is related to the purchase of products. Many companies are in the trade for resale, and they have to buy bulk stock to operate. Direct expenses would refer to anything that is related to what you have bought.
2. Indirect expenses are the costs incurred in the daily operation of a business. They are not related to the sold products.
In many instances, indirect expenses are not allocated to any area in particular.
Explanation:
To run a business successfully, you need to be able to keep proper and correct financial history. That’s why it’s important to understand the difference between indirect and direct expesnse.
Keeping your financial records in order assists your business to remain tax compliant as is required by law. It is vital to input your indirect expenses in the correctly allocated places not only to maintain compliance but also to benefit from tax deductions.
Business owners do receive some perks and tax deductions for some indirect expenses. Certain indirect expenses such as your utilities which are required to keep your business going are subject to tax deductions. This rings especially true for business owners who operate from their homes.
It is imperative to know the distinction between the two types of expenses, especially when it comes to costing your products. If you fully understand the true costs of the production of the products, you can charge for your items more competitively.
Business is a hard nut to crack, but with the right tools in hand, you can be sure you will give your opponents a run for their money.
The accuracy of your financial records and the efficiency in the operation of your business will prove invaluable should the time come to attract investors.
Financial investors are more likely to outlay money to a company who is on top of their game and understands their business rather than throw it away on a whim with a company that shows no interest in keeping the correct records. Your financial records are a justification for a profitable business.