In business, overhead or overhead expense refers to an ongoing expense

Expense

In common usage, an expense or expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often...

 of operating a business (also known as Operating Expenses - rent, gas/electricity, wages etc.). The term overhead is usually used to group expenses that are necessary to the continued functioning of the business but cannot be immediately associated with the products/services being offered (e.g., do not directly generate profit

Profit (accounting)

In accounting, profit can be considered to be the difference between the purchase price and the costs of bringing to market whatever it is that is accounted as an enterprise in terms of the component costs of delivered goods and/or services and any operating or other expenses.-Definition:There are...

s). Closely related accounting

Accountancy

Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in...

 concepts are fixed cost

Fixed cost

In economics, fixed costs are business expenses that are not dependent on the level of goods or services produced by the business. They tend to be time-related, such as salaries or rents being paid per month, and are often referred to as overhead costs...

s versus variable cost

Variable cost

Variable costs are expenses that change in proportion to the activity of a business. Variable cost is the sum of marginal costs over all units produced. It can also be considered normal costs. Fixed costs and variable costs make up the two components of total cost. Direct Costs, however,...

s and indirect costs versus direct costs

Indirect costs

Indirect costs are costs that are not directly accountable to a cost object . Indirect costs may be either fixed or variable. Indirect costs include taxes, administration, personnel and security costs, and are also known as overhead.There are two types of Indirect Costs...

.

Overhead expenses are all costs on the income statement

Income statement

Income statement is a company's financial statement that indicates how the revenue Income statement (also referred to as profit and loss statement (P&L), statement of financial performance, earnings statement, operating statement or statement of operations) is a company's financial statement that...

except for direct labor, direct materials & direct expenses. Overhead expenses include accounting fees, advertising, depreciation, insurance, interest, legal fees, rent, repairs, supplies, taxes, telephone bills, travel and utilities costs.

Overhead can be classified under four headings:

1. Functional classification.
2. Classification on the nature of expenditure.
3. Element-wise classification.
4. Classification on behavior of expenditure.