The final concept I want to define is expenses.
Again it says in calling you should get expense or expenditures and outflow of money to another person or group to pay for an item or service it goes on.
It says in accounting expenses, a very specific meaning is an outflow of cash or other valuable assets from person or company to another person or company.
Technically an expense is an event in which an asset is used up or liabilities incurred and this is really at the heart of the definition. An expense though in simple terms is a cost associated with doing business.
So let’s say I want to run a hair salon. What are the costs of running a hair salon.
I got to pay to keep the lights on so I’m going to pay utilities bill. I’ll have a utilities expense, I have to pay hairdressers, I’m going to pay them salaries or wage so I’ll have a salaries expense.
What are other costs of running that type of business.
Maybe I rent my premises, I’ll have a rent expense.
I could have a property tax expense if I own my business there’s lots and lots of expenses but these are the costs of doing business so when I think of revenues I think earn I think money coming in.
It’s not always going to be tied to cash as we’ll talk about later.
Expenses are those costs of doing business so a few common ones are utility salaries and rent.
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