Definition: A selling expense is a cost incurred to promote and market products to customers. These costs can include anything from advertising campaigns and store displays to delivering goods to customers. Any expense that is associated with selling a good or making a sale is considered a selling expense.
What Does Selling Expense Mean?
These expenses are reported on multi-step income statement under the operating expense section. Selling expenses are traditionally listed before general and administrative expenses because investors and creditors are typically more concerned about the costs related to producing income. General and admin expenses are still important, but they don’t actually produce any sales.
At the end of each accounting period, the selling expenses are listed in the selling expense budget by the marketing department. This budget estimates the amount of costs the sales team will incur in order to meet the sales goals of management.
Some typical expenses reported on the budget are store equipment depreciation for in store displays, sales staff salaries, rent expense for the sales floor, store supplies, advertising in any form, and sales staff commissions.
Obviously, there are many more selling expenses, but those are just some of the most common ones. Just remember that any cost incurred to sell a product is a selling expense. A tricky example of this is building rent.
You might think that building rent is considered a general expense because it doesn’t contribute to sales, but it does. The sales floor has no other purpose except to display and sell product. This means it is solely used to sell goods. The rental space that is used for storage, offices, and bathrooms, on the other hand, doesn’t serve a sales purchase. The rent expenses associated with these rooms is listed in the general and admin expenses.