An expenditure which is chargeable against revenue during an accounting period. An expense results in the reduction of an asset. All expenditures are not expenses. For example, a company buys a truck. It trades one asset – cash – to acquire another asset. An expenditure has occurred but no expense is recorded. Only as the truck is depreciated will an expense be recorded. The concept of expense as different from an expenditure is one reason financial reports do not show numbers that represent spendable cash. The distinction between an expenditure and an expense is important in understanding how accounting works and what financial reports mean. (To expense is a verb. It means to charge an expenditure against income when the expenditure occurs. The opposite is to capitalize.
(see also Capitalize)
Other Definitions
Expense – A decrease in equity resulting from the costs of materials and services used to produce the business’s or organization’s revenue.(Book: Cost Accounting for the Construction Firm by Bill G. and Whiteman, Daniel E. Eppes)
