Expense

What is an Expense?

An expense represents the costs that a business incurs during its operations to generate revenue. Expenses are recorded on the income statement and reduce the company's net profit. They can include a wide range of items such as salaries, utilities, rent, and other operational costs necessary to run the business.

Short Description: Costs incurred by a business in the process of earning revenue, impacting the company's financial results.

• Operating Expenses: Daily operational costs such as rent, utilities, and wages.
• Non-Operating Expenses: Costs not related to core business operations, like interest payments.
• Fixed Expenses: Costs that do not change with the level of production or business activity, such as rent.
• Variable Expenses: Costs that vary directly with production levels, like raw materials.

Understanding and managing expenses is crucial for a business's profitability and financial health. Proper tracking and categorization enable effective budgeting and cost control.