Business, Legal & Accounting Glossary

Definition: Expenditure

Quick Summary of Expenditure

The action of spending funds.

What is the dictionary definition of Expenditure?

Dictionary Definition

Expenditure is defined as a payment or a promise of future payment. Alternatively, it is described as an actual cash payment or cash-equivalent payment for services and goods against funds available in an obligation settlement. This is attested by an appropriate document like a receipt, voucher and invoice.

  1. The act of spending money for goods or services.
  2. The act of consuming something.
  3. Money paid out; an amount spent.

Full Definition of Expenditure

An expenditure occurs when something is acquired for a business — an asset is purchased, salaries are paid, and so on. An expenditure affects the balance sheet when it occurs. However, an item of expenditure will not necessarily show up on the income statement or affect profits at the time the expenditure is made. All expenditures eventually show up as expenses, which do affect the income statement and profits. While most expenditures involve the exchange of cash for something, expenses need not involve cash.

Capital Expenditure

It is money that is spent to improve or purchase physical assets like machinery and buildings. This category of expenditure is done by companies to maintain or enlarge their operational scope. Quantum of capital expenditure depends on an industry it operates in. Telecommunication, utility and oil are more capital intensive sectors.

Advertising Sales Ratio

It is the total advertising expenditure divided by aggregate sale over a period of time. Advertising sales ratio is valuable in determining the effectiveness of a company’s advertising campaign at generating sales. Lower advertising sales ratio leads to better expenditure.

Adjusting Entry

It is a bookkeeping entry done at the end of an accounting period. Adjusting entry assigns expenses and income to a dissimilar period. Entries are made beneath accrual accounting so that it correctly reflects expenditure and income timings. Examples of adjusting entries are accounts payable, amortization and depreciation.

Capital Consumption Allowance

It is GDP percentage that is due to depreciation. Capital consumption allowance subtracted from GDP equals the net national product. It assesses the quantum of expenditure that a country requires to maintain its productivity.

Deferred Charge

It is an expenditure that is regarded as an asset until it becomes crucial to a business. For example, prepaid rent is regarded as an asset. This remains until rent becomes officially due.

Capital Rationing

It is restricting new investments of a company. This is done either by setting a ceiling on portions of a capital budget or by utilizing a higher cost of capital when judging the merits of probable investments. Capital rationing is usually done when a company has a history of bad returns from investment. [3]

Synonyms For Expenditure

outgo, outlay, spending, expending, consumption

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Expenditure. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. September 22, 2021 https://payrollheaven.com/define/expenditure/.
Chicago Manual of Style (CMS):
Expenditure. PayrollHeaven.com. Payroll & Accounting Heaven Ltd. https://payrollheaven.com/define/expenditure/ (accessed: September 22, 2021).
American Psychological Association (APA):
Expenditure. PayrollHeaven.com. Retrieved September 22, 2021, from PayrollHeaven.com website: https://payrollheaven.com/define/expenditure/

Definition Sources

Definitions for Expenditure are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 26th March, 2020 | 6 Views.