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An expense is a cost incurred by a company in carrying out its operating activities during an accounting period to earn income. Expenses are debited to an expense account and credited to either an asset or a liability account. It decreases assets or increases liabilities. Expenses reduce owner’s equity. Expense can be in the form of actual cash payments, an amount taken out of earnings or an expired portion of an asset. It can be said that, all expenses are cost but not all cost are expenses. Expense can also be described as an outflow of cash or other assets from a company or a person to another company or person. Some of the business expenses given by Expenses Assignment Help are salaries, wages, depreciation, utilities, interest on loans, payment to suppliers, rent for the retail space, and cost of electricity. Some of the common types of expenses included in the financial statements are-utility expenses, administration expenses, impairment loss, cost of goods sold, finance cost etc. Expenses can be studied thoroughly in Expenses Assignment Help.
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Classification of expenses
The different classes of expenses explained by Expenses Assignment Help are-
- Fixed Expenses-
These expenses are not controllable as they are necessary. Fixed expenses are to be incurred regularly and don’t change every month. For example- rent or car payments.
- Flexible Expenses-
Flexible expenses are the expenses which can be controlled. They occur regularly and are necessary for day to day living.
- Discretionary Expenses-
Discretionary expenses are the expenses which are incurred by choice and thus can be controlled. For example having pizza with friends, movies expense and even money that we save is a type of discretionary expense.
- Operating Expense-
Operating expenses are the expenses which cannot be directly attributed to the manufacture of a product. These are the cost incurred by operating the business. For example-salary as it is must to pay to the employees in order to make and sell the products of the business. Some other examples are computer expenses, advertising, maintenance cost, packaging materials etc. Operating expenses can be sub divided into fixed and variable expenses or into selling, general and administrative expenses.
- Cost of goods-
It includes all the expenses incurred in the production of goods. For example-payment for accusation of raw materials to be used to make a product which is to be sold. Cost of goods does not include cost of labor used in the production of a product. It includes payment to the workers who are physically engaged in the production of a product.
- Non-operating Expenses-
It is a residual category for common expenses that cannot be capitalized under any other head. For example-purchase of office building is a capital expenditure considered as non-operating expense, any interest paid on loans taken by the company.
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