expense

Examples of expense in the following topics:

• Net Income

  • Net income in accounting is an entity's income minus expenses for an accounting period.
  • Net income in accounting is an entity's income minus expenses for an accounting period.
  • It is computed as the residual of all revenues and gains over all expenses and losses for the period and has also been defined as the net increase in stockholder's equity that results from a company's operations.
  • The items deducted will typically include tax expense, financing expense (interest expense), and minority interest.Likewise, preferred stock dividends will be subtracted too, though they are not an expense.
  • Net sales (revenue) – Cost of goods sold = Gross profit – SG&A expenses (combined costs of operating the company) = EBITDA – Depreciation & amortization = EBIT – Interest expense (cost of borrowing money) = EBT – Tax expense = Net income (EAT)

• Sample Income Statement

  • It then calculates operating expenses which, when deducted from the gross profit, yield 'income from operations. ' The difference of other revenues and expenses is then applied to the income from operations.
  • Selling, General and Administrative expenses (SG&A or SGA): Consists of the combined payroll costs.
  • Selling Expenses: Represents expenses needed to sell products (salaries of salespeople, commissions and travel expenses, advertising, freight, shipping, depreciation of sales, store buildings and equipment, et cetera).
  • Other expenses or losses: Expenses or losses not related to primary business operations (foreign exchange loss).
  • Finance costs: Costs of borrowing from various creditors (interest expenses, bank charges).

• General and Administrative Expenses (G&A)

  • In reporting expenses on an income statement, there are various expenses incurred that are not directly related to production.
  • Most of these expenses tend to revolve around indirect aspects of production.
  • By separating these expenses from the production expenses, it provides investors, management, and other stakeholders with insights surrounding the efficiency of organizational operation.
  • As a result, they make 20% less than company A each year, but their expenses are 40% less than company.
  • This demonstrates where it is (under operating expenses).

• Capital Expenditures

  • CAPEX include expenses for tangible goods, such as the purchase of plants and machinery, as well as expenses for intangibles assets, such as trademarks and software development.
  • A CAPEX cannot be deducted as an expense in the year in which it is paid or incurred and must be capitalized.
  • An ongoing question for the accounting of any company is whether certain expenses should be capitalized.
  • Costs that are expensed in a particular month simply appear on the financial statement as a cost incurred that month.
  • Most ordinary business expenses are clearly either expensable or capitalizable, but some expenses could be treated either way, according to the preference of the company.

• Getting over the hurdles

  • Any building can be made either more expensive or less expensive depending on how it's designed and constructed.
  • Yes, adding more insulation, installing rainwater collectors, fitting higher-quality windows, placing solar panels on roofs and putting passive shading structures over windows can incur extra expenses, but when these improvements eliminate the need for a heating and cooling system the extra costs can be negated.
  • Construction expenses remain virtually unchanged (mostly because of a reduction in heating, ventilation and air-conditioning needs) with subsequent energy costs reduced by one-half to three-fourths.

• Payback, ROI and renewable energy

  • The long-term financial rewards of renewable energy cannot be understood without comprehending ‘payback' or return-on-investment (ROI), both of which measure profitability in relation to capital expenses.
  • Costs for nonrenewable energy sources, such as coal and oil, include extraction from the ground and refinement (both of which are expensive).
  • With renewable energy (e.g. wind and sunlight), however, after the expense of conversion machinery is paid for, the electricity or heat obtained is free of charge (minus the cost of maintenance and disposal) while non-renewables maintain the constant expenses associated with: continuous extraction and refinement, waste treatment, maintenance and disposal, and related environmental disasters and healthcare costs.

• Budgets, forecasts, and alternative scenarios

  • Prior to the beginning of the year, managers prepare a plan for what they hope to accomplish in the coming year in terms of revenue, expenses, and net profit.
  • "A budget is a financial document used to project future income and expenses.
  • The budgeting process may be carried out by individuals or by companies to estimate whether the person/company can continue to operate with its projected income and expenses.
  • Then, as the year unfolds, actual income and expenses are posted to the accounting records, and compared to what was budgeted, and a variance from budget for each item budgeted (e.g. sales, selling expenses, advertising costs, etc) is calculated.
  • Managers responsible for the various income and expense items then examine each variance and, if it is substantial, search for an explanation.

• Defining the Income Statement

  • The income statements reports the revenues, expenses, and overall net profit or loss over a given reporting period.
  • Expenses are the overall costs of acquiring the above revenues.
  • This depreciation of assets is allocated as an expense over the lifetime of the assets being recorded.
  • Research and Development (R&D) - Investment in the research and development of revenue-generating products will also be a business expense for the income statement.
  • The income statement starts with revenues, minuses costs and expenses, and results in a net gain or loss.

• Creating a Budget

  • Prior to the beginning of the year, managers prepare a plan for what they hope to accomplish in the coming year in terms of revenue, expenses, and net profit.
  • Budget can be more formally defined as "a financial document used to project future income and expenses. " The budgeting process may be carried out by individuals or by companies to estimate whether the person or company can continue to operate with its projected income and expenses.
  • Listing all required, fixed expenses, like rent and mortgage, utilities, and phone
  • Then, as the year unfolds, actual income and expenses are posted to the accounting records, and compared to what was budgeted, and a variance from budget for each item budgeted (e.g., sales, selling expenses, advertising costs) is calculated.
  • Managers responsible for the various income and expense items then examine each variance and, if it is substantial, search for an explanation.

• Profit and Value

  • Profit is equal to a firm's revenue minus its expenses, while value is the present value of the firm's current and future profits.
  • Earnings Before Interest and Taxes (EBIT), or operating profit, equals sales revenue minus cost of goods sold and all expenses except for interest and taxes.
  • Earnings Before Tax (EBT), or net profit before tax, equals sales revenue minus cost of goods sold and all expenses except for taxes.
  • Earnings After Tax, or net profit after tax, equals sales revenue after deducting all expenses, including taxes (unless some distinction about the treatment of extraordinary expenses is made).
  • Profit is equal to a firm's revenue minus its expenses, while value is the present value of the firm's current and future profits.