Understanding Indirect Expenses: Can You Help Clarify What They Are?

Dear Jahangir,

Please advise me about indirect expenses. Can you help me with this matter?

Thank you.

Hi Jehangir,

Indirect expenses are those expenses that are not direct expenses (e.g., if you are dealing in the sale of electrical goods such as TVs and fridges and you purchase them from traders, it becomes a direct expense. However, if you are paying for office electricity, salaries, telephone bills, etc., those are considered indirect expenses).

Another example is if you are in the manufacturing of cloth, then the purchase of raw materials for making cloth will be a direct expense, whereas office and administrative expenses will be considered indirect.

Amjadkhan Shaikh

To narrate briefly, the expenses are broadly classified as Direct and Indirect Expenses in the P&L or Income and Expenditure Account. Those expenses that relate to the manufacturing process are considered Direct, while others are categorized as Indirect. For example, Opening Stock, Purchases, Wages, Purchase returns, etc., are considered direct expenses. Indirect Expenses include Salaries, Printing and Stationery, Conveyance, Office Rent, Discounts allowed, Electricity/Water charges, and more. The nature of expenses involved in a transaction determines where they should be appropriately placed under that category.

Hi,

Indirect expenses mean those expenses debited to the Profit & Loss account, called indirect expenses. For example: rent, printing & stationery, electricity expenses, office maintenance, repairs & maintenance expenses, etc. These expenses are also known as nominal expenses or operational expenses.