Is depreciation expense an administrative expense?
Depreciation could be an administrative expense, but it can also be a selling expense, and a part of the cost of manufacturer's products.
Where depreciation is reported depends on the assets being depreciated. For example, the depreciation on the building and furnishings of a company's central administrative staff is considered an administrative expense. The depreciation on the sales staff's automobiles is considered part of the company's selling expenses. The depreciation on a manufacturer's factory and production equipment will be included in the overhead cost of the product. When a manufacturer's products are sold, some of the depreciation will be included in the cost of goods sold. When some of the manufactured products are held in inventory, some of the depreciation associated with the manufacturing process will be included in the cost of the inventory.
As you can see, depreciation is often part of many functions within a company. The company's depreciation should be assigned to each of the areas where the assets are utilized.
