Expenses Definition


The word expense can be employed to refer to the out flow of money to cover a service or product. In financial accounting, expenses are defined as the price of products sold, or services consumed, at the practice of producing earnings for a provider. The expenses of an organization are reported to the sales invoice.


Expenses are some times called the price of conducting business, since those expenses comprise all of those things necessary to bring and service clients as a way to make revenue.

Financial accounting for expenses may transpire in a range of means. The out flow of money by a provider creates a drop in owner’s equity, and since expenses will probably create a reduction in resources, such as cash. Otherwise, an investment can result in a rise in obligations, like accounts receivable.

Typical Sorts of expenses located on the income statement could function the Following:

  • Cost of Goods Sold: comprises labour and Garbage
  • Operating Expenses: comprises research and development, selling, administrative and general expenditures
  • Other: contains depreciation and amortization (non-cash expenses)
  • Financial: comprises Taxes and interest cost

In addition to the aforementioned income statement expenditures, the statement of cash flows might contain:

  • Capital Expenditures: purchases of fixed assets, that can be anticipated to offer benefits beyond the present year