Expense
Financial Accounting glossary · The Accounting Cycle & Financial Statements
Definition
Outflow or use of assets, or incurrence of liabilities, in producing goods and services for revenue generation.
Expense in plain English
An expense is simply the cost of what a business uses up to earn its money — the fuel it burns to keep the engine running. Every time a company pays out or uses up something of value (cash, supplies, an employee's hours), or takes on a bill it will owe later, in order to make and sell its products, that's an expense. If a bakery uses $200 of flour and pays a baker $150 to turn it into bread it can sell, both are expenses. The key idea: expenses are what you spend to generate revenue, and profit is simply what's left after you subtract them.
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