Accounting



Is there a difference between an expense and an expenditure?

An expense is reported on the income statement. An expense is a cost that has expired, was used up, or was necessary in order to earn the revenues during the time period indicated in the heading of the income statement. For example, the cost of the goods that were sold during the period are considered to be expenses along with other expenses such as advertising, salaries, interest, commissions, rent, and so on.

An expenditure is a payment or disbursement. The expenditure may be for the purchase of an asset, a reduction of a liability, a distribution to the owners, or it could be an expense. For instance, an expenditure to eliminate a liability is not an expense, while expenditures for advertising, salaries, etc. will likely be recorded immediately as expenses.

Here’s another example to illustrate the difference between an expense and an expenditure. A company makes an expenditure of $255,500 to purchase equipment. The expenditure occurs on a single day and the equipment is placed in service. Assuming the equipment will be used for seven years, the cost of the equipment will be reported as depreciation expense of $100 per day for the next 2,555 days (7 years of service with 365 days each year).

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.




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11 Responses to “Is there a difference between an expense and an expenditure?”

  1. Is there a difference between an expense and an expenditure … Mobile on February 4th, 2010 5:21 pm

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  2. Ken on February 5th, 2010 8:22 pm

    I have an interview for a Tax Compliance Officer position with the IRS. Since I did not take accounting in college, they want me to take an “accounting assessment” at my interview. What can I do over the weekend in order to pass this and get the second interview?

  3. Annie on February 10th, 2010 2:57 am

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  4. gurmeet singh on February 12th, 2010 8:14 am

    how to calculate book value of the company or wht is the formula to calculate book value

  5. zawar on February 16th, 2010 10:24 am

    gaap principals

  6. d-banz on February 23rd, 2010 12:07 pm

    pls i want to no the differences betweeen capital expenditure and revenue expenditure and their examples respectively.thanks for helping us to solve our accounting questions,May God richly Bless you!!!!!!

  7. ACoach on February 24th, 2010 8:00 am

    What is a capital expenditure versus a revenue expenditure?

    A capital expenditure is an amount spent to acquire or improve a long-term asset such as equipment or buildings. Usually the cost is recorded in an account classified as Property, Plant and Equipment. The cost (except for the cost of land) will then be charged to depreciation expense over the useful life of the asset.

    A revenue expenditure is an amount that is expensed immediately—thereby being matched with revenues of the current accounting period. Routine repairs are revenue expenditures because they are charged directly to an account such as Repairs and Maintenance Expense. Even significant repairs that do not extend the life of the asset or do not improve the asset (the repairs merely return the asset back to its previous condition) are revenue expenditures.

  8. Amani Ken on April 7th, 2010 9:49 am

    Hi,

    How are advances to emplyees treated in the books of account at the end of the year once fully deducted.

  9. M. Kafil Uddin on April 22nd, 2010 2:43 am

    Expenses : related cost of consumtion. It is basicaly related any payment for revenue cost.

    Expenditure : related cost of in future or continue support. Payment for getting support in present and also in future.

    uddin_kafil@yahoo.com

  10. Zayed Ahmed on June 5th, 2010 1:35 pm

    I am currently learning accounting and i have a question
    What is Materility?
    What is Relevance?
    What is Understandibility?
    What is Comparebility?

    And how are all these related to the accounts or accountig?

  11. Olubunmi on July 25th, 2010 8:09 am

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