Expenses incurred to sell goods and to operate the business are called indirect or operating expenses. These expenses are classified into the following three groups:
EXPLANATION AND TREATMENT OF INDIRECT EXPENSES
A) OFFICE AND ADMINISTRATIVE EXPENSES
These are the expenses incurred for carrying out the day-to-day administration of the business.
Generally the following expenses are included under this head.
SALARIES OR OFFICE SALARIES OR SALARIES AND WAGES
1. Remuneration paid to office employees at the end of each month for their services is termed as “Salaries” or “Office Salaries”. Salaries paid to employees of sales and marketing department may be termed as “Sales Salaries”. Salaries being the expense of the business should be debited to Profit and Loss Account. If a trial balance shows “Salaries and Wages” as one balance instead of two balances, It becomes difficult to ascertain as to how much of this balance would go to the Trading Account and how much to the Profit and Loss Account. Under such circumstances, no attempt should be made to divide this balance into the two balances, rather the whole amount of salaries and wages, should be debited to Profit and Loss Account and should be supported by a note (Foot note) stating that for a Trading concern amount of wages’ is very nominal and are treated as unproductive wages. Therefore, in the absence of any information the whole amount Of “Salaries and Wages” should be taken to the “Profit and Loss Account.”