[Imran2008in]

Hi,
My friends I am confused about these elements.
1. what is indirect and direct cost?
2. what is indirect and direct expense?
3. where these elements will b recorded in the accounting books?
4. what is difference b/w direct cost and direct expense?
5. what is difference b/w indirect cost and indirect expense?
Your friend,
M.IMRAN

[ROLCAM]

1) direct cost,
A cost which can be assigned to a definite process or operation or to the manufacture of a particular product, as distinguished from overhead.
2) indirect cost,
Any other cost that is not direct (as above)
Overhead falls under this category.
3) direct expense,
An expense which is not associated with the
Manufacture of the product, advertising in the selling of the product is such an expense.
4) indirect expense,
Here all the indirect expenses are included with the exception of direct expenses.
Example:- head office expenses.
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COSTS are to be found in the TRADING and
MANUFACTURING ACCOUNTS.
EXPENSES are to be found in the PROFIT &
LOSS ACCOUNT.

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One needs to arrive at the COST of GOODS
Sold by gathering in the Trading and Manufacturing accounts all the Direct and Indirect costs.
This brings about the GROSS PROFIT.
The grosss margin has a great significance.

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The gathering of all the direct and indirect
Expenses , which takes place under different
Headings leads to getting a NET PROFIT
When deducted from the GROSS PROFIT.

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So COSTS at the Manufacturing & Trading Account stage
And
EXPENSES at the Profit and Loss Account stage.