Expense Category
Utilities

What expense category does electricity come under?

There is no definitive answer to this question as it will depend on the specific business and how they categorize their expenses. However, we can provide some guidance on which expense category is most likely to be appropriate for electricity.

Businesses that rely heavily on electricity

For businesses that rely heavily on electricity, such as manufacturing or production businesses, it is likely that electricity will be classified as a production cost. This is because electricity is a direct cost of producing the goods or services that the business sells.

Businesses that use electricity for general operations

For businesses that use electricity for general operations, such as office-based businesses, electricity is likely to be classified as an overhead expense. This is because it is a cost that is necessary for the business to function, but is not directly related to producing any goods or services.

Businesses that use electricity for heating or cooling

For businesses that use electricity for heating or cooling, such as retail businesses, electricity is likely to be classified as a utility expense. This is because it is a cost that is necessary to maintain the premises in a comfortable environment for customers and staff.

In general, the category will depend on the specific business and how they categorize their expenses.

The information provided in this article does not constitute legal or financial advice and is for general informational purposes only. Please check with an attorney or financial advisor to obtain advice with respect to the content of this article.
Electricity
“Accurate classification of expenses is vital for businesses as it forms the backbone of financial reporting, tax compliance, and strategic decision-making. It enables businesses to track and analyze their spending patterns, identify cost-saving opportunities, and assess the profitability of various operations or projects. Having a single source to turn to for accounting classification suggestions, such as the Ramp Expense Classifier tool, is immensely helpful as it provides consistency, reduces ambiguity, and streamlines the expense classification process.”
Audrey Carroll
Senior Manager, Accounting, Ramp
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“As we scale we need tools that are built to scale with us - we need to see expenses real time, we need to see duplicate spend. These types of insights are important to the health of our business.”

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