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Direct expenses comprise all those expenses incurred in bringing the goods to the place of business or trade or in-production process till the goods are placed in saleable places. The subsequent expenses may be taken as direct expenses:
1. Wages paid to workers concerned in production are debited to the trading account given the manufacturing account is not prepared individually
2. Carriage and freight inwards are transportation expenses incurred to take the goods or raw material to the position of the business or to the firm's go down/factory. These expenses, if paid or outstanding then are debited to trading account.
3. Octroi is paid while goods enter municipal limits. It paid upon goods purchased is a direct expense and is debited to trading account.
4. Custom duty paid upon importing goods for selling purposes is debited to trading account. Whether the duty is paid on sales export, this amounts to selling expenses and is shown in the loss and profit account.
5. Factory rent, insurance, lighting and power and heating are the expenses incurred to convert raw material in finished goods. These expenses are debited to trading account.
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