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What is an Expense?

Definition: An expense is an outflow of cash or other valuable assets from a company to an individual or business

In a financial accounting sense, an expense is an event where a liability is incurred or an asset is used up. By examining the accounting equation, we can see that expenses are used to reduce owner's equity.

International Accounting Standards define expenses as 'decreases in economic benefits during the accounting period in the form of outflows or depletions of assets...'

The recording of an Expense in the fiancial statements

Expenses are income statement accounts, and are increased on the debit side of the control account. When an expense is recorded, a corresponding credit must be recorded either to an asset or a liability account in accordance with double-entry bookkeeping.

Many types of Expenses

Some expenses tend to be common to a large proportion of businesses; these include wage, rent, and interest expenses. It is important to note that there are potentially an infinite number of expenses depending on the scope and scale of the business.


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