XERO classifies expenses types as cost of goods sold (Direct costs), Overhead and Expense. MYOB classifies expenses types of Cost of sales and Expense. Business may have different views on accounting for cost of sales. Questions like whether to include lease, energy, freight and warehousing can arise. Consistency or long-term usage should be preferred. 1 Overheads are the expenditure which cannot be conveniently traced or identified with any particular revenue unit, unlike operating expenses such as raw material and labour. Essentially, there are two business overheads, administrative and manufacturing.2 These can be fixed, meaning they can be the same amount over time or semi-variable, like power and telephone usage that can slightly vary based on usage. They can also include marketing expenses. Selling, General & Administrative (SG&A) is the term that should be used for overheads in the Profit and Loss. These include all non-production expenses in any...
Business Advisory Blog