Expense Category
Client Services

What expense category do sales commissions come under?

There is no definitive answer to this question as it will depend on the specific business and how they operate. However, there are a few expense categories that sales commissions are commonly classified under, which are listed below.

1. Cost of Goods Sold

One common expense category that sales commissions can be classified under is cost of goods sold (COGS). This is because commissions are often based on the sales of products or services, and so can be seen as a direct cost of generating revenue. COGS is typically a deductible expense for businesses, which means that it can be used to reduce taxable income.

2. Selling, General and Administrative Expenses

Another common expense category for sales commissions is selling, general and administrative expenses (SG&A). SG&A includes all the costs associated with running a business, such as marketing, rent, utilities, and so on. Sales commissions can be seen as a part of the costs associated with selling products or services, and so can be classified under SG&A.

3. Other Operating Expenses

Another possibility is that sales commissions could be classified as other operating expenses. This is because they are often incurred as a result of business operations, but don't necessarily fit into any other specific category. For example, if a business pays commissions to sales staff based on the number of sales they make, this would be an operating expense. However, if the commissions are paid based on the profit generated from sales, this could be classified as a different category such as cost of goods sold or selling, general and administrative expenses.

4. Depreciation and Amortization

Another possibility is that sales commissions could be classified as amortization and depreciation expenses. This is because they are often paid over time, and can be seen as a part of the cost of doing business. For example, if a business pays sales commissions based on the number of sales made over a period of time, this could be classified as depreciation and amortization. However, if the commissions are paid based on the profit generated from sales, this could be classified as a different category such as cost of goods sold or selling, general and administrative expenses.

5. Interest Expense

Another possibility is that sales commissions could be classified as interest expense. This is because they are often paid over time, and can be seen as a part of the cost of doing business. For example, if a business pays sales commissions based on the number of sales made over a period of time, this could be classified as interest expense. However, if the commissions are paid based on the profit generated from sales, this could be classified as a different category such as cost of goods sold or selling, general and administrative expenses.

As you can see, there are a few different expense categories that sales commissions can come under. It will ultimately depend on the specific business and how they operate. However, the most common expense categories are cost of goods sold, selling, general and administrative expenses, and other operating 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.
Sales commission
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