Definition of Expense
An expense is reported on the income statement in the period in which the cost matches the related sales, has expired, was used up, or had no future value.
Examples of Expenses
Examples of expenses include the cost of the goods that were sold during the current period, and the following which also occurred during the current period: salaries earned by the company’s employees, interest expense incurred, commissions earned by sales representatives, rent and utilities for a retail store, and many others.
Definition of Expenditure
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 payment in the same accounting period as the amount becomes an expense.
Examples of Expenditures
Examples of expenditures that will not be an expense in the accounting period in which the payments are made include the purchase of land for a future expansion and the principal portion of a monthly loan payment.
Here is an 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 immediately placed in service. Assuming the equipment will be used for seven years, the asset’s cost could be reported on the income statement as depreciation expense of $100 per day for the next 2,555 days (7 years of use).
