Expense

AAA

DEFINITION of 'Expense'

1. The economic costs that a business incurs through its operations to earn revenue. In order to maximize profits, businesses must attempt to reduce expenses without also cutting into revenues. Because expenses are such an important indicator of a business's operations, there are specific accounting rules on expense recognition.

2. Money spent or costs incurred that are tax-deductible and reduce taxable income.

INVESTOPEDIA EXPLAINS 'Expense'

1. Expenses are the opposite of revenues. Examples of expenses include payments to suppliers, employee wages, factory leases and depreciation.

2. Tax authorities frequently have very specific regulations that allow people to deduct certain expenses if used for business-related activities. For example, a traveling salesperson is allowed to deduct traveling expenses (fuel expenses and car rental costs) as a business deduction, because those costs are an integral part of the job.

RELATED TERMS
  1. Home Office Expense

    Expenses incurred from the operation of a business or the performance ...
  2. Flexible Expense

    An expense that is easily altered or avoided by the person bearing ...
  3. Net Income - NI

    1. A company's total earnings (or profit). Net income is calculated ...
  4. Selling, General & Administrative ...

    Reported on the income statement, it is the sum of all direct ...
  5. Reimbursable Out-Of-Pocket Costs

    Cash payments that an individual or company incurs on behalf ...
  6. Income Statement

    A financial statement that measures a company's financial performance ...
Related Articles
  1. Personal Finance

    Where is the cost of living lowest in the U.S?

    Visit the heart of Cameron County, Texas, where Harlingen has the lowest cost of living in the United States, according to Kiplinger and CBS Money Watch.
  2. Forex Education

    Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".
  3. Options & Futures

    Bloated Budget? How To Trim The Fat

    Blood, sweat and tears should belong in the gym, but your money deserves some training time too.
  4. Forex Education

    Understanding The Income Statement

    Learn how to use revenue and expenses, among other factors, to break down and analyze a company.
  5. Budgeting

    How Do Your Finances Stack Up?

    We look at the average consumer numbers, so you can get some perspective on how you spend your hard-earned dollars.
  6. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  7. Taxes

    What is the best method of calculating depreciation for tax reporting purposes?

    Learn the best method for calculating depreciation for tax reporting purposes according to generally accepted accounting principles, or GAAP.
  8. Fundamental Analysis

    Are accounts receivable used when calculating a company's debt collateral?

    Learn how accounts receivables are recorded as assets on a balance sheet; they are used when calculating a company's total debt collateral.
  9. Fundamental Analysis

    Work In Progress (WIP)

    Work in progress, also know as WIP, is an asset on the company balance sheet. WIP is the accumulated costs of unfinished goods that are currently in the manufacturing process.
  10. Fundamental Analysis

    What is the difference between cost of equity and cost of capital?

    Read about some of the differences between a company's cost of equity and its cost of capital, two measures of its required returns on raised capital.

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center