What are Direct Indirect Expense

Last updated at Dec. 16, 2024 by Teachoo

Those expense which are related to business are Direct Expenses

All others are Indirect Expenses .

For example

For a factory , salary paid to workers is Direct Expense but salary paid to accountant is an Indirect Expense

(as workers are directly used in manufacturing process)

But for a CA Firm , salary paid to accountant is an direct expense (as accountant are directly used in accounting process)

Suppose a Chemist Shop purchases Medicines for 300000

It also pays 20000 freight to truck operator who brings the medicines

It sells the Same for 400000

Calculate Profit and Loss

View Answer

Suppose a Factory purchased Plastic for Rs 100000

It paid 30000 Salary to Labour who converted the same into Plastic Bottles
It also paid 10000 salary to accountant for making books of accounts
It sold Plastic Bottles for Rs 170000

View Answer

Calculate Profit and Loss

PROFIT AND LOSS ACCOUNT
Expenses	Amount	Income	Amount
Purchases	100000	Sales	170000
Salary Labour	30000
Salary Accountant	10000
Profit	30000
Total	170000	Total	170000

Prepare Trading and P&L in this Case

TRADING AND P&L ACCOUNT
Expenses	Amount	Income	Amount
Purchases	100000	Sales	170000

Direct Expenses
Salary Labour	30000

Gross Profit	40000
Total	170000	Total	170000

Indirect Expenses		By Gross Profit	40000
Salary Accountant	10000

Net Profit	30000
	40000		40000

Difference between Direct and Indirect Expenses

Direct Expenses		Indirect Expenses
Those expenese which are part of main business model are called Direct Expenses.These are the expenses without which we cannot do business		Those expenses are extra business expenditure,without these expenses also,business can be run
They are shown in Trading Account		They are shown in Profit and Loss Account
Examples of Direct Expenes		Examplesof Indirect Expenses