![]() ![]() Examples of Expense Accounts:Įxamples of expense accounts are Costs of Sales, Cost of Goods Sold, Costs of services, Operating expense, Finance Expenses, Non-operating expenses, Prepaid expenses, Accrued expenses and many others. This can help you in recognizing when you are overspending in a particular aspect of the business. It is important to maintain expense accounts so that you can keep track of the different expenses that your business incurs. What are Expense Accounts?Įxpenses accounts are items within a business’s books that represent the expenses it incurred during its operations. So even if you didn’t pay for it, the rent that you owe would still be considered an expense. Since you incurred liability without an economic benefit in exchange, there is no increase in your net worth but rather there’s a decrease instead. Not paying for your rent will result in you incurring a liability. Well, let’s refer to a part of the definition of expenses by the IASB: “…incurrences of liabilities that result in decreases in equity…”. In such a case, your net worth will decrease and we can infer that the payment you made for rent is an expense.īut what if you didn’t pay for rent? Your cash won’t be reduced, so you won’t be losing any net worth right? ”Īs per the above definition, anything that can decrease a business’s net worth can be considered an expense, provided that they are related to the business.įor example, when you pay for rent, your cash is reduced without a corresponding increase in another asset. Expenses definedĪccording to the International Accounting Standards Board (IASB), expenses are “are decreases in economic benefits during the accounting period in the form of outflows or depletions of assets or incurrences of liabilities that result in decreases in equity, other than those relating to distributions to equity participants. So it’s important to learn about them if you want your business to stay and grow. ![]() Generating revenue has its corresponding costs.įor example, when a company sells goods, the corresponding cost would be what it paid for acquiring such goods.įor a company that offers services, the corresponding cost would be the necessary expenses to deliver a service.Īside from these costs, there are other expenses that are necessary in order to keep the business afloat.Įxamples of these expenses are the salaries you pay to your employees, utility bills, rent, etc.Ī business will incur expenses as long as it stays in operation. ![]()
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