Sorting and reporting expenses according to the type of activity for which the expense was incurred. The functional expense classifications for a nonprofit organization would be Program #1, Program #2, Management and General, Fundraising.
Businesses have functions such as manufacturing, selling, and general and administrative.
(Sorting and reporting expenses by the type of expense such as salaries, rent, utilities, etc. is known as natural expense classifications.)
|» For more clarity on this term:|
← Go Back
Join our Newsletter
Receive our free 19-page accounting cheat sheet. Plus, stay up to date with the latest questions answered.