Is stationary and postage a direct expense for a company? ?

Question

and is advertising a direct expense?

Answer 1

Everything except inventory is a direct expense.  

Answer 2

It depends.  From an accounting standpoint, it's a direct expense.  But it isn't just your CPA who has an interest in your financials.

I used to work for an environmental consulting firm that did a lot of consulting with the state and with engineering firms that contracted with the state.  So we got audited every year by the state's environmental regulatory agencies.  Their definition of a direct expense versus an indirect expense was very specific and very precise, and I had to prepare our financials in such a way that they could immediately see the breakdown.

For their purposes, the ONLY direct expenses were expenses that could be identified as belonging to a specific project.  Long distance telephone calls to clients were direct expenses and had to be identified as such and charged to direct expenses.  Long distance calls that couldn't be identified were identified as "overhead" or indirect, and charged to indirect expenses.

Fortunately, we were a small enough company that breaking out our bills and our travel expenses was easy.  

The reason the state did this is because if you were awarded a state contract, or if you were named as a subcontractor on a state contract, your overhead expenses were limited.  You could charge 100% of your direct expenses, but the state had a percentage that could be charged for indirect.  They audited us every year to make certain that our indirect expenses were always within their allowed ratios.

A few years ago I spent 2 years temping at that state agency and got to watch the audit process and reasoning from the other side of the plate.  It was interesting.

So there you go.  One real-world example of when a direct expense isn't a direct expense and when overhead goes out the window.