Direct Expenses

[Zikria Yamin]

Dear Seniors,

All the expenses incurred on the purchases are to be pooled into cost of purchase, which means no independent existence and all the expenses incurred to promote sales are clubbed as indirect expenses, Then please explain with example, What is meant by Direct expenses.
I'll be very thankful.

[Abdur.Rehman]

Sory...Can u plz clarify ur question...
"which means no independant existence"???

[Zikria Yamin]

I mean to say that all those expenses which are incurred on Purchases are to be pooled into the cost of purchase, so whether they would de treated as direct expenses or as a part of the cost of purchase?
I am very thankful to Bhai Abdur Rehman.

[Abdur.Rehman]

Normally they would be a part of cost of sales in the profit and loss account but will not be included in the cost of inventory itself. But in special circumstances they can also be a part of cost of intories.

[Schuaeb]

Zikria cost of sales includes cost of inventories and direct expenses and some of these expenses may be included in cost of inventory.

For example freight inward is to be included in cost of inventory, whereas, depreciation of machinery is not. However, both of these expenses are part of direct expenses.