Meaning & use

indirect expense

noun·Academicbusinessfinance

Last updated

UK/ˌɪndaɪˈrekt ɪkˈspens/
US/ˌɪndəˈrekt ɪkˈspens/

Meanings

  1. nouncountablebusinessfinance

    A business cost not directly tied to producing a particular product, such as rent, utilities, or administration.

    Grammar: Countable; often used in the plural: 'indirect expenses'.

    Patterns

    • indirect expenses
    • an indirect expense
    • cover indirect expenses
    • reduce indirect expenses

    Rent and electricity are indirect expenses because they are not tied to one product.

    The company cut indirect expenses by moving to a smaller office.

    Accountants separate direct costs from indirect expenses.

  2. nouncountablebusinessfinance

    Any cost that supports the whole organization rather than a specific project or department.

    Grammar: Often used with 'allocate' or 'apportion': allocate indirect expenses to departments.

    Patterns

    • allocate indirect expenses
    • indirect expenses for something

    The manager had to allocate indirect expenses across all departments.

    Insurance is an indirect expense that benefits the entire firm.

Word forms

pluralindirect expenses

Common combinations

indirect expenses
The budget lists direct materials and indirect expenses separately.
reduce indirect expenses
We reduced indirect expenses by renegotiating the lease.
allocate indirect expenses
The accountant allocated indirect expenses to each division.
cover indirect expenses
The grant does not cover indirect expenses like office rent.

Synonyms and how they differ

overhead
Overhead (or overheads) is the everyday word for ongoing business costs; indirect expense is the more technical accounting term.
indirect cost
Almost the same meaning; 'cost' is more common in general business writing, while 'expense' is common in accounting.
fixed cost
A fixed cost does not change with output, but it may be direct or indirect; an indirect expense is defined by not being tied to a specific product.

Opposites

direct expensedirect cost

Word family

indirect cost noun
A cost not directly linked to a product; often used interchangeably with indirect expense.
direct expense noun
A cost clearly tied to making a product, such as raw materials.

Commonly confused: indirect expense or incidental expense? indirect expense or direct expense?

indirect expense vs incidental expense

An incidental expense is small and unexpected; an indirect expense is regular and supports the whole business.

indirect expense vs direct expense

Direct expenses can be traced to a product; indirect expenses cannot.

Practice

Which of these is most likely an indirect expense for a bakery?

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