Direct Expenses:

As stated earlier, these are the expenses incurred on the goods purchased till they are brought to the place of business for sale. When goods are imported from a foreign country. expenses such as freight, insurance, import duty, dock dues, clearing charges, carriage, etc., have to be incurred. All these expenses are termed as direct expenses.

Similarly, in connection with local purchases, expenses like freight, octroi duty, carriage or cartage are' normally paid for bringing the goods to the place of business. All these expenses are treated as direct expenses and shown on the debit side of the Trading Account. Freight and carriage paid in relation to purchases are also called 'Freight Inwards' and ‘Carriage Inwards' respectively. The administrative expenses, selling and distribution expenses, interest paid, etc., are called indirect expenses and so excluded from the Trading Account.