Business, Legal & Accounting Glossary
The action of spending funds.
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.
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.
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.
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.
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.
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.
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.
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]
outgo, outlay, spending, expending, consumption
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This glossary post was last updated: 26th March, 2020 | 0 Views.