FLASH SALE! - "FINANCIAL MODELING COURSE BUNDLE AT 60% OFF" Enroll Now

List of Indirect Expenses

Updated on January 3, 2024
Article byWallstreetmojo Team
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What are Indirect Expenses?

Indirect costs are the expenses that an organization incurs in delivering its day-to-day business operations. Examples include salaries, insurance, rent, rates and taxes, legal charges, advertisement, commission, packing and store supplies expenses, traveling expenses, audit fees, interest on the loan, bank charges, amortization, equipment depreciation, equipment maintenance, utilities, etc. These costs cannot be apportioned to the cost and selling price of a product.

Explanation

Expenses borne by the company can be of two types- direct expenses and indirect expensesIndirect ExpensesIndirect expenses are the general costs incurred for running business operations and management in any enterprise. In simple terms, when you want to buy grocery from a supermarket, the transportation cost to get you to the supermarket and back is the indirect expenses.read more. Direct expenses are the costs directly related to the manufacture of goods, such as the cost of raw materials and direct labor expenses. In contrast, indirect expenses are the indirect costs. A company incurs these costs in delegating its daily business operations. Indirect expenses can be of two types- fixed indirect costs and recurring indirect expenses.

List-of-Indirect-Expenses (Main)

You are free to use this image on your website, templates, etc, Please provide us with an attribution linkHow to Provide Attribution?Article Link to be Hyperlinked
For eg:
Source: List of Indirect Expenses (wallstreetmojo.com)

List of Indirect Expenses

Given below is the list of indirect expenses classified based on various expenses.

  1. Business and Administration ExpensesAdministration ExpensesAdministrative expenses are indirect costs incurred by a business that are not directly related to the manufacturing, production, or sale of goods or services provided, but are necessary for the smooth functioning of business operations, such as information technology, finance & accounts.read more
  2. Sales and Marketing Expenses
  3. Economic and Other Expenses

Financial Modeling & Valuation Courses Bundle (25+ Hours Video Series)

–>> If you want to learn Financial Modeling & Valuation professionally , then do check this ​Financial Modeling & Valuation Course Bundle​ (25+ hours of video tutorials with step by step McDonald’s Financial Model). Unlock the art of financial modeling and valuation with a comprehensive course covering McDonald’s forecast methodologies, advanced valuation techniques, and financial statements.

#1 – Under Business and Administration Expenses

Indirect expenses like salaries, insurance, legal charges, rent, rates, and taxes all fall under business and administration expenses. These expenses are concerned with the administration of the business of an organization. These expenses are discussed in detail below:

  • Salaries: Salaries are the payment by an employer to their employees against their services. The salaries offered to employees shall differ from employee to employee, designation to designation, and organization to organization. The salaries are usually cleared during the month-end unless stated in the agreement.
  • Insurance: IInsurance can be better defined as an arrangement under which an organization avails financial protection from an insurer (insurance company) for their manufactured goods against unforeseen losses caused by damage or theft. It is backed up by a contract that states the right of an entity to receive financial protection against unforeseen losses from an insurer or an insurance company.
  • Rent, Rates, and Taxes: Rent is an amount that an entity is required to pay to the landlord for using his or her property for conducting his day to day business operationsBusiness OperationsBusiness operations refer to all those activities that the employees undertake within an organizational setup daily to produce goods and services for accomplishing the company's goals like profit generation.read more. The amount of rent to be paid to the landlord and the contract tenure are mentioned in the contract. Rates and taxes can be defined as the number of fees paid to the municipality for servicing the property used by an entity, and the number of fees charged depends on the type of property used by an entity.
  • Legal Charges: Legal charges can be defined as the right of a lending company (lender) to take over the property or other assets of the borrower for failing to pay the borrowed money of the former.

#2 – Under Sales and Marketing Expenses

Indirect expenses like advertisement and marketing, commission, packing and store supplies, and travel all fall under sales and marketing. These expenses are concerned with the selling and marketing of the goods manufactured and sold by an organization. These expenses are discussed in detail below:

  • Advertisement: An organization incurs advertisement and marketing expenses to enhance its product visibility in the market and design and implement strategies. It is done to convince the maximum audience to purchase their products over similar products that its competitors offer.
  • Commission: A commission can be of two types. It can be an expense incurred by an entity for availing the services of a middleman, and it can also be a sort of expense incurred by an entity for paying a particular percentage of profits to the salesman for selling off their products. In the latter case, the higher the sales, the higher shall be the commission earned.
  • Packing and Store Supplies Expenses: These expenses are incurred while packing products and supplying the same to the sale stores. These costs are generally charged whenever they incur.
  • Traveling Expenses: Traveling expenses can be defined as the costs that are generally incurred while conducting activities related to the business. These expenses include the expenses borne by the employees for commuting to the office from home and home from the office. These expenses can be either of the two types- reimbursable and non-reimbursable. Reimbursable traveling expenses incurred by the employees can be reimbursed, whereas non-reimbursable traveling expenses incurred by the employees cannot be reimbursed.

#3 – Under Economic and Other Expenses

Indirect expenses like audit fees, interest on the loan, bank charges, and amortization expenses all fall under the economic and other expenses category. These expenses are concerned with the economic expenses of an organization’s manufactured and sold goods. These expenses are discussed in detail below:

Conclusion

Indirect expenses are of various types and can be divided into three categories: business and administration expenses, Sales and marketing expenses, and economic and other expenses.  Expenses such as salaries, insurance, rent, rates and taxes, and legal charges are business and administration expenses. Expenses such as commission, packing, store supplies, advertisement and marketing, and traveling expenses are termed sales and marketing expenses. Expenses such as interest on loans, audit fees, amortization expenses, and bank charges are termed economic and other expenses.

Recommended Articles

This article has been a guide to the List of Indirect Expenses. Here we discuss indirect expenses under Business and Administration, Sales and Marketing, Economic and Other Expenses with a detailed explanation. You can learn more from the following articles –