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What does it mean to report expenses by function?

Author:
Harold Averkamp, CPA, MBA

Definition of Reporting Expenses by Function

Reporting expenses by function means to classify and report expenses according to the type of activity for which the expenses were incurred.

Examples of Reporting Expenses by Function

Manufacturers classify and report their expenses on their internal income statements by the following functions:

Not-for-profit organizations classify and report expenses on their statement of activities according to the following functions:

  • Each of its major programs
  • Management and general
  • Fund-raising
  • Membership development

In addition, not-for-profit organizations report their expenses by their nature (natural classifications such as salaries, electricity, repairs, etc.)

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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