In an income statement, the expenses may be classified either by:

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Classifying expenses by nature refers to grouping them into categories such as salaries, utilities, rent, etc. Classifying expenses by function refers to categorizing them into groups such as production costs, selling and distribution costs, and administrative expenses. This classification method provides more detailed information about the different types of expenses a company incurs and helps management make more informed decisions about cost control, pricing strategies, and resource allocation.

In an Income Statement, the Expenses May Be Classified Either