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expense
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expense

accounting
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Quick Summary

Expenses are the costs a business incurs to generate revenue. They represent money going out of a company. These can include the cost of goods sold, salaries, rent, utilities, advertising, and depreciation, which is the gradual loss of value in assets over time.1

There are two primary methods for accounting for expenses:
* Cash basis: Expenses are recorded when they are actually paid.12
* Accrual basis: Expenses are recorded when they are incurred, meaning when the benefit is received, regardless of when payment is made.12

For self-employed individuals, many ordinary and necessary business expenses can be deducted to reduce taxable income. These deductions are typically claimed on Schedule C of their tax return.3

Summary created from Britannica articles using AI. AI can make mistakes, so verify using Britannica articles.
6 Britannica Sources
  1. The income statement: Money coming in and going out
  2. accounting - The income statement
  3. Self-employed tax deductions: What you can claim on Schedule C
  4. Cash vs. accrual accounting: How are you recording revenue and expenses?
  5. accounting - Depreciation
  6. asset

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