Expenses

Expenses (Definition)

Expenses are the costs incurred in running a business, such as wages, rent, and utilities.

Key aspects of expenses include:

1. Represent the cost of resources used in the process of generating revenue
2. Recorded on the income statement and reduce a companys profit
3. Can be fixed (constant regardless of business activity) or variable (change with business activity)
4. Include both cash and non-cash items (e.g., depreciation)
5. Categorized into operating expenses, non-operating expenses, and capital expenses
6. Tax treatment can vary depending on the nature of the expense
7. Proper expense management is crucial for maintaining profitability

Understanding and controlling expenses is essential for effective financial management and improving a businesss bottom line.