Accounting of Selling and Distribution overheads in Cost Accounting

Both in manufacturing and non-manufacturing concerns selling function is involved besides manufacturing or purchase of goods. In order to perform this function efficiently selling and distribution expenses are incurred in all the concerns. Most of these expenses are not identified with products and that is why these are included indirect costs.


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The sole aim of the business is to maximize profits but this is only possible by reducing the cost of production or increasing the sales in the existing markets or through the entry in the new markets. No doubt cost of production is reduced by increasing the production but increase in sales is a must to meet the increase are undertaking sales promotion activities but they are required to face stiff competition also. Under such circumstances it becomes necessary for a concern to incur selling and distribution expenses and sometimes these are so heavy that these are even more than the manufacturing expenses.

In some concerns after sales services is provided for special products like radios, televisions, refrigerators, washing machines, sewing machines and some special facilities and discounts are given to the wholesalers and retailers. Accounting and control of selling and distribution expenses which are generally incurred after the production of the goods (also called after-prodcution costs) has assumed an increased importance in these days in order to determine the cost of sales and profitability of each job and product, to control the selling and distribution costs, to fix prices and formulate sales price policy, to fix optimum sales levels and to make decisions regarding sales i.e. selling under different conditions, markets, regions and by different methods.


The accounting of selling and distribution overhead requires three types of analysis:

  • According to nature or object of expenditure.
  • By function or cost centre.
  • By products or cost units.
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