The nature of expense method is a method of presenting the income statement in external accounting. It categorises income and expenses according to their nature. All expenses incurred in a period are compared with total income, regardless of whether the corresponding products have already been sold. Changes in inventories of finished goods and work in progress as well as own work capitalised are taken into account in order to correctly determine the profit for the period. This method is widely used in Germany and provides detailed information on the company's cost structure. An alternative approach is the Cost of sales method. Special valuation requirements can be met by add-ons such as the Versino Financial Suite that enable advanced financial analyses.
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