Debitoor Dictionary

Accounting terms explained in a simple way

Expense - What is an expense?

Definition: An outflow of money or asset to another individual or company as payment for an item or service.

Technically speaking, an expense is an event where an asset is used up or a liability is incurred. With regards to the accounting equation, expenses effectively reduce owner's equity.

Recording an expense

Expenses are recorded on the debit side of an expense account (which is an income statement account) and a credit is recorded to either a liability or an asset account in accordance with double-entry bookkeeping.

Types of Expenses

There are possibly an infinite number of expenses depending on the nature and size of the business.

However there are some expenses that are common to almost all businesses, these being rent expenses, wage expenses, and interest expenses.