Websters calls it “a spending or consuming; disbursement, expenditure. What’s important about expenses for the purpose of business accounting is that expenses are deductible against taxable income. Common expenses are rent, salaries, advertising, travel, etc. Questions arise because some businesses have trouble distinguishing between expenses and purchase of assets, especially with development expenses. When your business purchases office equipment, if you call that an expense then you can deduct that amount from taxable income, so it reduces taxes.

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Tim BerryTim Berry
Tim Berry

Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry.