Hi CFA says: “expenses may be grouped together either by nature or function. For example, grouping together expenses such as depreciation on manufacturing equipment and depreceiation on administrative facilities into a single line item called ‘depreciation’ represnets a grouping by nature of the expense. An example of grouping by function would be grouping together expenses into a category such as cost of goods sold, which would include some salaries, material costs, depreciation and other direct sales-related expenses”. Even so, I’m not grasping the distinction between nature and function. Could someone explain it to me? I think if I just see it from a different angle I’ll get it. Thanks
By nature - expenses are groubed based on the source of the expense.
By function - expenses grouped by where expenses were used.
Here’s the source: