what is expense

*Expense

1.the amount of money that is needed to pay for buying something

2.the amount of money that must be spent especially regularly to pay for something

3.An expense consists of the economic costs that a business incurs through its operations to earn revenue.

 

4.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.

5. An expense is the reduction in value of an asset as it is used to generate revenue.

Note:

1. always remember that when expenses increase the value of assets and net profit decrease.

2.when expenses decrease the value of assets and net profit increase.

List of expenses

1.Rent

Rent covers the cost of office space, storage and retail areas. Rent is tax-deductible if a company conducts business on the premises and doesn’t own the property.

2.Utilities

Electricity, telephone and Internet services are basic business expenses. A percentage of utilities costs are tax-deductible in a home office used solely for the purpose of conducting business.

3.Insurance

Policies insure a business against property loss and liability. Healthcare coverage for employees sometimes is included in this category. Premiums for business operations that the IRS considers “ordinary” (common) and “necessary” (helpful to the business) are tax-deductible expenses.

4.Fees

Fees can be divided into into multiple categories. These include charges for business registrations and renewals. Fees cover the professional services of accountants, attorneys, bookkeepers, tax preparers, consultants, advisers and payroll firms.

5.Bad debt/irrecoverable/doubtdebt

The term bad debts usually refers to account receivable(or trade accounts receivable) that will not be collected.  However, bad debts can also refer to notes receivable that will not be collected.

6.Salary/Wages

Wages include workers' pay and benefits, which are factored into their total compensation. Pay for contractors and subcontractors are in this expense category, as well. Wages are tax-deductible.

7.Taxes

Local business taxes and business property taxes are deductible on a federal tax return.

8.Interest cost

The cost of borrowing money, or interest, for loans, credit and mortgages for business use is a tax-deductible expense.

9.Supplies

Common office items such as paper, pens, pencils, file folders, paper clips and ink cartridges are recurring expenses that are tax-deductible.

10.Depreciation

Capital expenses aren’t tax-deductible, but business owners can recoup a percentage of the costs each year by calculating the depreciation costs on their tax returns. Standard office equipment, such as computers, copiers, fax machines and scanners, depreciate over time. Large machinery, such as tractors and vehicles, also depreciate.

11.Maintenance cost

The costs of cleaning work areas and repairing equipment, such as computers, are tax-deductible.

12.Travel cost

Business travel expenses include bus, airline and train tickets; parking fees; and car rentals. Car expenses covering business activities are tax-deductible. If a car is used for both personal and business purposes, only the business expense is tax-deductible. Conferences and conventions can be categorized under either travel or “training” expenses.

13.Meals and Entertainment

Both meals and entertainment are tax-deductible if they’re used to engage customers, employees or clients in business activities.

14.Training cost

Training expenses include courses, books, seminars, programs offering continuing education units and any form of education that advances the skills of small business owners and their employees. Training expenses generally are tax-deductible. A tax attorney or accountant can help determine when expenses in this category aren't tax-deductible.