Fixed Charges

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)      

In accounting, those financial expenses which must be paid as they fall due.  In railroad accounting, fixed charges include rent for leased roads (usually guaranteed interest or dividends), rent for leased properties, interest on funded debt, interest on short-term or unfunded debt, and amortization of discount on funded debt.  Sinking fund appropriations and insurance are sometimes regarded as fixed charges, but since sinking fund charges really are a means of extinguishing debt, it appears more logical to segregate this item as a disposition of surplus, and insurance is generally regarded as an administrative expense.

Fixed charges are sometimes confused with fixed costs, those costs made up of overhead or burden (indirect material, indirect labor, and general administrative costs) which continue regardless of the rate of operation, as compared with variable costs, as set up in cost systems of accounting.

Back to Information