What does it mean to report expenses by function?

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.)