Expenses
from class:
Principles of Finance
Definition
Expenses are the costs incurred by a business in the process of earning revenue. They are recorded on the income statement and reduce net income.
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5 Must Know Facts For Your Next Test
- Expenses decrease a company's net income on the income statement.
- Operating expenses include costs like rent, utilities, and salaries.
- Non-operating expenses might include interest payments and losses from investments.
- Accrued expenses are those that have been incurred but not yet paid.
- Depreciation is a non-cash expense that allocates the cost of an asset over its useful life.
Review Questions
- How do expenses affect net income on the income statement?
- What is the difference between operating and non-operating expenses?
- Can you give an example of an accrued expense?
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