What is meant by expenses in accounting?

Expenses are cost incurred to purchase and pay for items such as labour, raw materials which are used in normal course of transaction.Expenses include:

  • Expenses arising in normal course of activities, such as the cost of sales and other operating costs, including the depreciation of non current assets. Expenses result in outflow of assets (such as cash and finished goods inventory) or the depletion of assets (for example the depreciation on non current assets)
  • Losses include for example, the loss on disposal of non current asset, and losses arising from damage due to fire or flooding. Losses are usually reported as net of related income. Losses might also be unrealized. Unrealized losses occur when an asset in revalued downwards, but is not disposed off. For example, unrealized loss occur when marketable securities owned by entity are revalued downwards.

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