expense
Definition
Money expended or cost incurred in a firm's efforts to generate revenue, representing cost of doing business. Expenses may be in the form of actual cash payments (such as wages and salaries), a computed 'expired' portion (depreciation) of an asset, or an amount taken out of the firm's earnings (such as bad debts). Expenses are summarized and charged in the firm's income statement as deductions from the income before assessing income tax. Whereas all expenses are costs, not all costs (such as those incurred in acquisition of income generating assets) are expenses.
Featured Tip
Young companies have to get the word out, but they also can go broke doing it. A decade ago, America Online spent so much money flooding the planet with free trial software that it tried to mask the bleeding by capitalizing those expenses on its balance sheet. (Regulators later nixed that accounting treatment, wiping out millions in accounting profits.) What percentage of sales should go toward marketing? As with sales, there is no one rule of thumb.
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