Expense
Definition
An expense is a cost the business incurs to operate. Rent, wages, supplies, and software are common expenses. Expenses reduce profit.
Example
Northstar Creative pays $1,000 for office rent. The $1,000 is recorded as Rent Expense, which reduces the business's profit for the month.
Why It Matters
Expenses tell the business owner what it costs to run the business. Recording them correctly is essential for an accurate P&L.