What expense category does overhead fall under?

There is no definitive answer to this question, as overhead can fall under multiple expense categories depending on the business and the way its finances are organized. However, some common expense categories that overhead may fall under include:

Operating Expenses

Overhead is often classified as an operating expense, which includes all the costs necessary to keep a business running on a day-to-day basis. This can include everything from rent and utilities to salaries and office supplies. Operating expenses are typically divided into two categories:

  • Fixed expenses: These are costs that remain the same each month, such as rent or insurance. They may fluctuate slightly over time, but not enough to make a significant difference in the budget.
  • Variable expenses: These are costs that can fluctuate from month to month, such as inventory or utilities. They may be more difficult to predict than fixed expenses, but they can be managed with careful budgeting.

Administrative Expenses

Another common classification for overhead is administrative expenses. This category includes all the costs associated with running the business, but excludes the costs of production or sales. Administrative expenses can include everything from rent and office supplies to legal fees and accounting services.

Indirect Expenses

Overhead is also often classified as an indirect expense. Indirect expenses are those that cannot be directly linked to the production of goods or services. This includes costs such as rent, utilities, and insurance. Indirect expenses are often classified into two categories:

  • Fixed expenses: These are costs that remain the same each month, such as rent or insurance. They may fluctuate slightly over time, but not enough to make a significant difference in the budget.
  • Variable expenses: These are costs that can fluctuate from month to month, such as inventory or utilities. They may be more difficult to predict than fixed expenses, but they can be managed with careful budgeting.

The correct expense category for overhead will vary from business to business, and it is important to work with a accountant or financial advisor to ensure that all expenses are properly classified. However, these are some of the most common expense categories that overhead can fall under.

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.

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