What is an Expense South Africa?
An expenditure is the operational cost that a business bears to produce income. One simply defines it as the cost one must spend to obtain something. As the common adage states, "you need to spend money to earn money."
Common expenditure items include payments to suppliers, employee wages, factory leases, and equipment depreciation. Businesses can deduct expenses from their income tax returns to reduce their taxable income and lower their tax liability.
The SA Revenue Service has strict rules for which business costs can be claimed as deductions.
In accounting costs are recorded on the accrual basis and and recorded in the accounting periods to which those costs relate.
Understanding Expenses
One of the main goals of company management teams is to maximize profits. Boost revenues while keeping costs in check achieves this. Slashing costs can help companies to make even more money from sales.
However, cutting costs too much could also have a detrimental effect. Spending less on ads saves money but also makes it harder for the company to be seen and connect with customers.
In the realm of accounting, accountants record expenses as any cost that adds to a company's total business operating costs. In other words, any costs that are borne due to a company's efforts or success in generating revenue. Expenses can encompass cash, cash substitutes, and depreciation.
Some common examples of tax deductible expenses include:
- Employee wages
- Rent or property lease
- Utility bills
- Advertising
- Cost of goods sold
Each business encounters inevitable costs, which are essential to sustain regular business functioning. A broader definition of expense is any cost that an individual or entity bears within a given timeframe.
Are drawings considered as an expense?
The drawing account is a debit account that decreases the total money in the business. However, it is not considered an expense account. This means that it is not an cost that the business has paid. It is not an expenditure that the business has paid and is generally not considered for tax purposes.
Is bad debt an Operating expense?
A bad debt is a cost that is part of your organization's operating expenses, specifically in selling and administrative costs. This cost reduces a company's profits when the sale that caused the bad debt was recorded on its financial statement.
The bad debt affects the company's profits. It is recorded at the time of the sale. This impacts the company's financial statement.
Is depreciation an expense?
Businesses use depreciation on an income statement. It is seen as a cost and should be used for year-end tax calculations. It can also help determine if an item can be sold quickly. Generally depreciation would occur slowly over time.
What are examples of types of expenses?
- Repairs
- Maintenance
- Rent
- Municipal
- Insurance
- Interest
- Bank charges
- Wages
- Salaries
- Cost of goods sold
- Raw Materials
Is an expense classified as income?
Earnings refer to the money you generate, while an expenditure is the money you disburse.
What best defines an expense?
It is simply defined as the cost one has to incur to acquire something. As the popular saying goes, “it costs money to make money.” Typical costs encompass payments to vendors, salaries for employees, factory rent, and equipment depreciation.
Is a salary an expense?
Employment expenses can include various costs related to hiring and managing employees. These costs may include recruitment expenses, training costs, salaries, commissions, and employer contributions to medical aid and retirement plans. Additionally, expenses such as leave costs, absenteeism, and perks like company cars can also be considered part of employment expenses.
Is stationery an expense?
You can claim expenses for day to day office supplies like paper, pens, and envelopes as stationary expenses.
Is water and electricity an expense?
The expense of utilities refers to the charges associated with the use of services like electricity, water, waste management, heating, and sewage. Costs are accumulated throughout the reporting period, computed, and set aside for, or payment is made.
What is amortization expense?
Charges for amortization cover the cost of long-term assets (such as computers and vehicles) throughout the duration of their utilization. Also known as depreciation costs, they are reflected on a corporation's profit and loss statement. These are considered capital expenditures.
What is a Business expense?
In the realm of accounting, an expense is defined as any cost that adds to a corporation's total business operation costs. In other words, any costs that a company incurs in its attempt or success in generating revenue. These costs could encompass cash, cash equivalents, and depreciation.
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