Direct vs. indirect

See shivani if repairs are made to the machinery those expenses are treated as revenue expenditure unless if it affects production (if those expenses are incurred for promoting production treat it as cap exp)

And dep on machinery is a kind of expense BT we don't treat it nd call it as expense because it is a non cash expenditure, we are not paying any cash for such depreciation we are Nly decreasing the value of such asset year by year

But what are direct and indirect expenses

 

 

how to know which expense to treat as direct or indirect?

 

 

A person may be just manufacturer, or he may be just a trader or just a service provider or a combination of any.

 

 

How to bifurcate expenses into direct and indirect

First of all HAPPY DIWALI. :-) Direct Expenses: Expenses connected with purchases of goods are known as direct expenses. For example, freight, insurance, of goods in transit, carriage, wages, custom duty, import duty, octroi duty etc. Without incurring these expenses, it is not possible to bring the goods from the purchase point to the godown of the business. such expenses are collectively known as direct expenses. Indirect Expenses: All expenses other than direct expenses are assumed as indirect expenses. Such expenses have no relationship with purchase of goods. Examples of indirect expenses include rent of building, salaries to employees, legal charges, insurance of building, depreciation, printing charges etc.

Direct expenses are which can be attributed to a cost object in an economically feasible manner. Indirect exps are which cannot be directly attributed to an economically feasible manner.

Dear All

 

 

Mr. X is a service provider of say dry cleaning services.

 

 

He takes advertising service to advertise his dry cleaning work.

 

 

Now will advertisement charges be direct expense or indirect expense?

 

 

Regards

It's then direct expenses.

Dear Devender Why so? Normally we take advertising as an indirect expense. Why are you taking it as direct expense in this case? Regards

Dear shiva Here dry cleaning activity is not related to manufacturing activity, since it is a service and it is directly related to that particular service that is why in this case it is treated as direct expenditure

Dear Friends

 

 

Consider Advertisment Expenses and following cases and advise whetehr it will be a direct or indirectect expense?

 

 

Case 1 The person incurring advertisement expenses is a manufactuerer and advertisement is regarding the finished goods he is selling.

 

 

Case 2 The person incurring advertisment expenses is a trader and advertisement is regarding the goods trader bought..

 

 

 

Case 3 The person incurring advertisment expense is a Service Provider and advertisment is regarding the promotion of service he is providing.

 

 

Whether advertisment expense in above cases is direct or indirect expense and why?

 

 

Regards

Shivani

 

 

 

 

 

please friends

 

 

tell me the answer in above 3 cases

 

 

expers please advise

 

 

regards