Expense

Expense is a term that refers to the economic costs that a business incurs through its operations to earn revenue. In simpler terms, expenses are the costs of running a business. They are the money spent in order to make money.

Types of Expenses

There are two main categories of expenses: Operating Expenses and Non-operating Expenses.

Operating Expenses

Operating expenses, also known as operational expenses, operating expenditures, operational expenses, or OPEX, are the costs that are directly related to the core business operations. They are the costs that a business incurs as a part of its normal business operations. Examples of operating expenses include wages, rent, utilities, insurance, depreciation, and amortization.

Non-operating Expenses

Non-operating expenses, on the other hand, are the costs that are not directly tied to a business’s core operations. They are the costs that are not necessary for a business to operate, but that it may incur in order to increase its profitability or to meet other company objectives. Examples of non-operating expenses include interest expenses, losses on the disposal of assets, and lawsuit settlements.

Accounting for Expenses

In accounting, expenses are subtracted from revenues to calculate net income. This is done in the income statement, one of the main financial statements of a company. The income statement shows a company’s revenues, expenses, and net income for a specific period of time.

Tax Treatment of Expenses

In many jurisdictions, businesses can deduct expenses on their tax returns. The specific rules for what can be deducted and how much can be deducted can vary widely. It is important for businesses to understand the tax rules in their jurisdiction and to take advantage of any available deductions.

See Also

• Cost
• Revenue
• Profit
• Loss
• Income Statement
• Balance Sheet
• Cash Flow Statement

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