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Expense is basically the cost incurred in relation to something. In general sense when we talk about Expenses in our daily lives it actually involves outflow of money so that the desired things can be procured like food, clothing, furniture, shelter, vehicles etc. But in accounting and business management field it has a more widespread meaning. To get a complete idea on the same make sure to grab Accounting Expenses Homework Help.

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What is the exact meaning of Expenses?

Thinking from a layman’s perspective expense is the cost incurred for buying the things that we need. But accounting expenses can mean outflow of cash as well as other assets so that all the business activities can run smoothly without any interruption. Some examples of expenses in business scenario are like paying for the raw materials, paying wages and salaries, expenses related to office supplies, electricity bills, insurance premiums, purchasing new machineries etc.

Expenses in accounting can be classified on multiple fronts like direct expenses, indirect expenses, operating expenses, non-operating expenses, routine expenses, non-routine expenses, capital expenses, financing expenses etc.

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A commonly seen situation is businesses

Sometimes a business may have to deal with a big expense like purchasing new machinery or procuring a new building. This is not the routine expense of the business,thus in this situation the internal cash reserves may not prove to be sufficient. Thus the company usually opts for borrowing from a third party which leads to creating a liability until the borrowed money is fully settled. Till the loan amount is repaid the organization has to pay interest and that is also a kind of expense.

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Why It Is Important To Manage Expenses?

It is really important to manage expenses because without doing so an organization can incur big losses. Generally the accounts and finance department are responsible for keeping a complete track of activities in this regard, and any major deviations are immediately reported to the top management. Managing expenses is important due to the following reasons-

  • Managing expenses helps in reducing wastage and in avoiding duplication.
  • It fixes responsibility of each department.
  • It gives an analysis that how much cash reserves are needed for future expenses.
  • Controlling the expenses becomes an easier task.
  • A level of expenses may be fixed so that profits can be maximized.

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