Indirect Cost
Accounting glossary · Understand, connect, apply
An indirect cost supports a cost object but cannot be traced to it economically and specifically. It is often assigned using a reasonable allocation basis rather than a direct measurement.
Example
A workshop pays 2,000 rent for space used by several products. Allocating it by floor area assigns part of the shared cost to each product.
Remember the difference
Indirect costs can be fixed or variable. An allocation helps assign costs; it does not prove that the allocated amount would disappear if one product stopped.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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