Expenses (Elementary)
Expenses are costs incurred by an individual or business in order to generate revenue. Expenses are typically categorized as either operating expenses or non-operating expenses. Operating expenses are those incurred in the normal course of business, such as rent, utilities, and payroll. Non-operating expenses are those incurred outside of the normal course of business, such as interest payments, taxes, and legal fees. Expenses are typically recorded in an accounting system and are used to calculate the net income of a business.
History of Expenses
The concept of expenses has been around since the dawn of commerce. Ancient merchants and traders kept track of their expenses in order to determine their profits. In the modern era, expenses are tracked and recorded in an accounting system in order to calculate the net income of a business. Expenses are also used to calculate the cost of goods sold, which is used to determine the gross profit of a business.
Comparison of Operating and Non-Operating Expenses
| Type of Expense | Examples |
|---|---|
| Operating Expenses | Rent, Utilities, Payroll |
| Non-Operating Expenses | Interest Payments, Taxes, Legal Fees |
Summary
Expenses are costs incurred by an individual or business in order to generate revenue. Expenses are typically categorized as either operating expenses or non-operating expenses. Operating expenses are those incurred in the normal course of business, such as rent, utilities, and payroll. Non-operating expenses are those incurred outside of the normal course of business, such as interest payments, taxes, and legal fees. For more information about expenses, you can visit websites such as Investopedia, The Balance, and Accounting Coach.
See Also
- Revenue
- Cost of Goods Sold
- Gross Profit
- Net Income
- Accounting System
- Cash Flow
- Income Statement
- Balance Sheet
- Profit and Loss Statement
- Cash Basis Accounting
