Business Expenses Definition

List of Business Expenses

Some examples are very much standard in the business industry, which is as follows:

#1 – Salaries

Salaries of employees, workers, and staff are the most common and important costs, which can be found in every business’s profit and loss accountProfit And Loss AccountThe Profit & Loss account, also known as the Income statement, is a financial statement that summarizes an organization’s revenue and costs incurred during the financial period and is indicative of the company’s financial performance by showing whether the company made a profit or incurred losses during that period.read more. It is the amount paid to the employees for their services to the business every month.

#2 – Telephone & Internet Expenses

In today’s time, no business can survive without a communication channel, and the highest cost to run any business is the expenses of telephone and internet service. It is another basic and most common cost available in every business’s profit & loss. To increase revenue, every business needs to expand, grow, communicate with its customers and vendors, and look after the policies of its competitors. All of this is possible only when good communication channels are available in the business.

#3 – Travelling & Conveyance

Traveling & conveyance is another common cost generally found in every profit and loss account. It is the costs incurred by the traveling of the employees, directors, or anyone for the business meetings, growth, and communication from office premises to the place where such an event has to take place. Conveyance is the local traveling to a meeting or client, whereas traveling can be considered out of station events.

#4 – Rent

Rent is a cost incurredA Cost IncurredIncurred Cost refers to an expense that a Company needs to pay in exchange for the usage of a service, product, or asset. This might include direct, indirect, production, operating, & distribution charges incurred for business operations. read more by those businesses who take the business premises on hire and run their business from a rented location. It is one of the high costs other than salaries, which is of high value and a fixed expense.

#5 – Printing & Stationery

Printing and stationery is also a regular cost incurred by the business on the notebooks, registers, A4 sheets of papers, pens, calculators, and other necessary items used in the business in day to day working of the business.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: Business Expenses (wallstreetmojo.com)

Deduction of Business Expenses

Deductible Expenses are those costs that are allowed as deductions in a business’s profit and loss account. Deductible expenses are somehow considered Business Expenses.

Business expenses incurred by any person from the business, be it an employee, director, owner, or staff, would be allowed a deduction from the income tax calculation provided such costs are incurred purely for the business. First, the expenses need to be verified by the respective managers. Then they should forward the reimbursement of business expenses to the accounts department.

BasedBasedThe accounting department looks after preparing financial statements, maintaining a general ledger, paying bills, preparing customer bills, payroll, and more. In other words, they are responsible for managing the overall economic front of the business.read more on the Invoices/bills received and after proper approval of the managers regarding the expenses being incurred for business, the accounting department would claim the deduction in the profit and loss statement of its business.

Other Types of Deductible Expenses

There are many types of costs incurred by a business for smooth & successful running. Some are allowed as deductible, such as business expenses, and others are Non-Deductible Expenses, such as Donations.

Other types of deductible expenses are which are not related are:

  • Entertainment Expenses: These incur for the entertainment purpose of the employees and staff working in the entity. The company incurs such expenses to keep the employees happy and provide a better work environment. It is allowed as a deduction even though they are not related to a business directly.Staff Welfare Expenses: These are also the costs for the benefit of the employees working in the entity. These include tea, coffee, snacks, and other celebration expenses for the employees.Depreciation: DepreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year.
  • read more is an intangible business expenseExpenseAn expense is a cost incurred in completing any transaction by an organization, leading to either revenue generation creation of the asset, change in liability, or raising capital.read more not incurred in cash/bank transactions. These expenses are for the use of machinery during the year, which is generally called normal wear and tear of the machinery over time.

How are Business Expenses Tracked?

The answer to the above question is straightforward. The person incurring such costs had to provide the Invoices/bills of the expenses for the business. Those invoices/bills will be verified by the designated person in the accounts department and must be approved by the respective managers. It can also be tracked from the bank statements of the business or through the credit card statement of the business if the expenses are paid from these banking sources.

Any expense paid through an electronic medium such as net banking, internet banking, credit card, and debit card can be tracked easily. This is because they have a transaction id and reference id attached to every payment, through which one can conclude whether it is a business expense or not.

Why do you need it?

A business expense is needed to run a business. For running any business, various types of costs must be incurred to operate the business smoothly and successfully. A lot of costs are recurring in nature. Rent and salaries are a significant amount of recurring expenses. Some of the expenses can be one-time payments in the year, such as Annual Subscription, Annual Membership, and Depreciation. The only need for it is to run any business because none of the business can run without incurring expenses. Every business needs different kinds of expenses to run it.

This has been a guide to Business Expenses and their definition. Here we discuss examples of business expenses and how to track them and their deduction. You may also have a look at the following articles –

  • Indirect Expenses DefinitionInsurance ExpenseUtilities Expenses DefinitionSelling ExpensesInstallment Sale