Selling expense | Sales expense

Selling expense (or sales expense) includes any costs incurred by the sales department. These costs typically include the following:

If the marketing function is merged into the sales department, then a number of additional marketing costs may be included in the preceding list, such as the costs of developing advertising campaigns, the artwork costs incurred to develop promotional materials, and social media expenditures.

The proportions of costs incurred can vary dramatically by business, depending upon the sales model used. For example, a customized product will require considerable in-person staff time to obtain sales leads and develop quotes, and so will require a large compensation and travel cost. Alternatively, if most sales are handed off to outside salespeople, commissions may be the largest component of selling expense. An Internet store may have few direct selling costs, but will incur large marketing costs to advertise the site and promote it through social media.

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.

Similar Terms

Selling expense is also known as sales expense.

Related Courses

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The Income Statement