Expenses have to be paid by the company in order to continue business and earn profits, however all expenses are not same and they can be categorized under various heads or types. Let’s look at various types of expenses –
- Manufacturing Expense – Manufacturing expenses in simple words refers to those expenses which are incurred by a company in order to produce or manufacture the product so that product is ready for sale in markets. Some examples of manufacturing costs are wages to the employees of the company, rent for the factory, maintenance and repairs for the machinery and furniture, raw materials cost, electricity charges, power and heating expense, depreciation on plant and machinery and so on.
- Administrative Expense – Administrative cost refers to those costs which are incurred by the company for regular operations in office, some examples of administrative costs are stationary cost, printing charges, salaries paid to workers, bonus to employees, rent for the office premises, electricity charges, computers and telephone expense, maintenance of office furniture and computers, legal cost and so on.
- Financial Expense – Every company takes loan or debt in order to do business, under financial expense head charges like interest on loan, interest on debenture, leasing and hire purchase charges, dividend to shareholders and such other charges come.
- Marketing Expense – Every company which manufactures the product need to sell that product in order to earn profit and for that company needs marketing and distribution network. Marketing expenses are done in order to increase the sale of the product or service of the company and earn higher profits. Some examples of marketing cost are incentives paid to salesmen, advertising and publicity charges for promotion of product or service, free samples, commission to wholesalers and distributors and so on.
- Taxation – Every company which is doing business and earning profits have to pay taxes which may take the form of sales tax, value added tax, service tax, income tax and so on.