difference between expenses and revenue expenditure
Answers
Answer:
Expenses are those costs that incur to earn revenues. Expenditure is the cost that is spent on the purchase or growth of fixed assets.
Explanation:
An expense is what you spend on the goods and services to keep your company running. Expenses can be for physical items, such as a furniture maker buying wood to make chairs. Or they can be other efforts that help drive your company toward revenue, like the commission you pay a salesperson.
Oracle / NetSuite
Business Solutions Articles Financial Management
Expense vs. Expenditure: What’s the Difference?
marc holliday Marc Holliday | Sr. Product Marketing Manager
October 29, 2020
expense vs. expenditure
Running your business costs money. You have to pay your employees, buy raw materials for products you sell and market your services. Keeping track of your expenses not only helps you see the financial health of your business and plan for the future, many business expenses can be written off for tax purposes. But not all expenses are treated the same.
Expense vs. Expenditure: What’s the Difference?
Understanding the differences between expenses and expenditures can help you accurately list information on your financial statements and maximize your tax deductions. Simply put, expenses revolve around what delivers revenue and allows your company to operate day to day. Expenditures help create long-term value around your business.
What is an Expense?
An expense is what you spend on the goods and services to keep your company running. Expenses can be for physical items, such as a furniture maker buying wood to make chairs. Or they can be other efforts that help drive your company toward revenue, like the commission you pay a salesperson.
Many expenses are tax deductible, or costs that can be subtracted from your overall gross income, reducing your tax liability at the end of the year. For an expense to be tax deductible it needs to be “ordinary and necessary.” To be considered ordinary, the expense needs to help your company generate revenue. And to be necessary, it must be something that is commonly accepted in your particular industry.
On an income statement, expenses are offset by revenue or other forms of income. By seeing your expenses and your revenue over a period of time, you get a snapshot of the financial health of your company.
What is an Expenditure?
Where expenses are purchases to increase revenue, expenditures are made to improve the long-term value of the company. There are two types of expenditures: revenue and capital.
Capital expenditures are one-time purchases like vehicles, machinery or real estate that add value to your business. These are also sometimes known as fixed assets. For example, Bill’s Printing buys a new building to accommodate growth and house new printers.