What is Meaning of Expenses ? Classification of Direct & Indirect Expense

Contents

Meaning of Expenses

Expenses is one of important element of cost following material and labour production is not possible only by material and labour, in addition to some expenses ate to be incurred for completing production work.

These expenses can be divided into two part:

(1) Meaning of Direct Expenses

Direct expenses are those expenses which are directly chargeable to a job account It is known as direct charges or chargeable expense. These are variable expenses which vary with die volume of production.

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(2) Meaning of Indirect Expenses

Indirect expenses are those other than indirect material cost and indirect labour cost which cannot be directly identified with a particular job, process or work order but are common to all jobs or process, indirect expenses that which needs to be apportioned because related part of expenses are included in the cost of production.

Sometimes these are included in cost in pre-determined ratio and these may be less or more than the actual expenses, in such a case, these expenses are known as ‘on cost’.

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