Business, Legal & Accounting Glossary
Business expenses are the costs a business incurs in the course of producing goods, providing services, or conducting trade. If a business operates at a profit, its business expenses may be tax-deductible. IRS rules specify that business expenses have to be necessary and ordinary to be deductible. Ordinary business expenses are frequent and/or ongoing, such as gasoline for business travel and business meals. Necessary business expenses are those that are appropriate or helpful for a business, such as office supplies, phone service, or Internet service. For tax purposes, business expenses have to be distinguished from capital expenses, expenses for cost of goods sold, and personal expenses. In accordance with the uniform capitalization rules, some cost of goods sold can be deducted but others need to be capitalized. Capital expenses represents assets in the business so, with the exception of some start-up and organizational costs which may be deductible as business expenses, most capital expenses need to be capitalized and not deducted. Personal expenses, however, are never deductible. However, if an expenditure is part business-related and part personal, then the portion used for business can be included with other deductible business expenses. For example, if a car serves as both a business vehicle and personal vehicle, the miles driven for business count as business expenses.
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This glossary post was last updated: 4th February, 2020 | 1 Views.