Accounting Dictionary

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Selling Expense

Definition: Selling expense includes any costs incurred by the sales department, which typically include:

• Salesperson salaries and wages
• Commissions
• Payroll taxes
• Benefits
• Travel and entertainment
• Facility rent
• Depreciation
• Advertising
• Promotional materials
• Utilities

There are varying treatments of selling expenses. Under the accrual method of accounting, you should charge them to expense in the period incurred. Under the cash basis of accounting, you should charge them to expense when paid.

You would normally report selling expenses in the income statement within the operating expenses section, which is located below the cost of goods sold. However, under a contribution margin income statement format, you would be justified in reporting commissions within the variable production expenses section of the income statement, since commissions usually vary directly with sales.