Business, Legal & Accounting Glossary
An expense is caused by a transaction or event arising during the ordinary activities of the business which causes a decrease in the ownership interest.
n. in business accounting and business taxation, any current cost of operation, such as rent, utilities and payroll, as distinguished from capital expenditure for long-term property and equipment.
An expenditure which is chargeable against revenue during an accounting period. An expense results in the reduction of an asset. All expenditures are not expenses. For example, a company buys a truck. It trades one asset – cash – to acquire another asset. An expenditure has occurred but no expense is recorded. Only as the truck is depreciated will an expense be recorded. The concept of expense as different from an expenditure is one reason financial reports do not show numbers that represent spendable cash. The distinction between an expenditure and an expense is important in understanding how accounting works and what financial reports mean. (To expense is a verb. It means to charge an expenditure against income when the expenditure occurs. The opposite is to capitalize.)
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This glossary post was last updated: 28th April, 2020 | 2 Views.