What are expenses?

What are expenses?

In normal business account amount incurred o carry out business operations is expenses. Examples are salary, rent etc.In technical term expenses is decrease the equity of the organization and such decrease may be due to outflow of resources, depreciation of resource or increase in liability.

Example of outflow of resource as expense

A salary of $ 200 is paid

This is expenses because it involve the outflow of cash (asst) the will decrease the equity by $ 200

Example of Depreciation as expenses

A building is depreciated @ 10 and cost of building is 100,000

This is an expense because the asset is depleting and equity will b reduced

Journal Entry for recognition of expenditure

		Dr.	Cr.
	Depreciation	10,000
	Fixed Asset		10,000

Statement of Financial Position (Balance Sheet)

	Equity	Assets
Opening	100,000	100,000
Depreciation/loss	(10,000)	(10,000)
closing