Grouping by nature: grouping together expenses such as depreciation on manufacturing equipment and depreciation on administrative facilities into a single line item called “depreciation” represents grouping by nature of expense.
Grouping by funciton: would be grouping together expenses into a category such as COGS, which would include some salaries, material costs, depreciation, and other direct sales-related expenses.
CFAI FSA Pg. 143
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