Describe about expense, Accounting Basics

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Q. Describe about Expense?

Expense -- an expenditure that is chargeable against revenue during an accounting period.An expense leads to the reduction of an asset. All expenditures aren't expenses. Forinstance, a company buys a truck. It trades one asset - cash - to attain another asset. Anexpenditure has taken place however no expense is recorded. Only as the truck is depreciated will anexpense be recorded. The notion of expense as different from an expenditure is one reasonfinancial reports don't show numbers which represent spendable cash. Distinctionbetween an expense and an expenditure is significant in understanding how accountingworks and what financial reports mean. (To expense is a verb. It means to charge anexpenditure against income when expenditure occurs. Opposite is to capitalize.)


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