Question

Disringus between loss and expense

Answer 1

Answer:

Explanation:

Loss – is the excess of expenditure incurred over revenue earned by a business for a given accounting period. It reduces the total capital invested in the business.

Loss = Expenses - Revenues

Such monetary damage may arise due to;

Business operations – Relating to business activities.

Non-recurring events – Relating to unforeseen events e.g. fire, theft, loss on sale of fixed assets, etc.

Accounting loss – Relating to accounting policy or accounting standard changes, etc.

Expense – Money spent by a firm for generating revenue is termed as expenditure or expenses. The cost incurred as expense usually expires during the same accounting period, i.e. it is not carried forward to a future period.

 

Expenses may occur in the following forms;

Cash payment of currency, for e.g. paying bills such as rent, salaries, etc.

A decline in the value of assets (e.g revaluation loss or investment loss), etc.

Accepting a liability, example – accrual of rent, etc.

The total cost of goods sold.

Depreciation & Amortization.

Bad debts, etc.