Different accounting software uses varying classifications, which businesses must adapt to for consistency and clarity. Xero categorizes expenses into three main types: Cost of Goods Sold (Direct Costs) Overheads Expenses MYOB, on the other hand, uses a simpler classification: Cost of Sales Expenses The classification of certain expenses, such as lease, energy, freight, and warehousing, often varies by business. These costs may sometimes be included in the Cost of Sales or classified differently depending on the company’s accounting policies. Consistency in classification is critical to ensure long-term comparability. Overheads Overheads refer to expenditures that cannot be directly traced to producing a specific product or service. Unlike operating expenses such as raw materials and labor, overheads include: Administrative Overheads: Office supplies, salaries for administrative staff, etc. Manufacturing Overheads: Factory utilities, maintenance, etc. Overheads can be further categoriz...