What is the difference between expenditure and spending

Suppose a plant is acquired for Rs. The amount spent on its acquisition is an expenditure, or more precisely, capital expenditure whereas the depreciation charged is an expense for the financial year.

In a nutshell, the amount spent with the purpose of obtaining benefit is an expenditure and the part of the expenditure that is used up during the financial year is an expense. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Key Differences Between Expense and Expenditure So far we have understood the concept and types of the two terms.

As against, expenditure implies the cost incurred for buying assets for the firm, in the form of outlay or depletion of assets or incurrence of liability. Expenses are incurred to meet the short-term needs of the business, whereas expenditure is incurred to meet long term needs of the concern. Expenses are recurring in nature, as they are incurred daily, weekly or monthly, and so the frequency is high.

Conversely, the frequency of incurrence of expenditure is comparatively less. And the benefits of such expense are limited to one accounting period only. On the other hand, the amount spent as an expenditure tends to provide benefits that stretch over more than one accounting year. While expenses are incurred in connection to the business operation so as to generate revenue, expenditure is incurred to increase the profit earning capacity of the concern.

As per the matching concept, an expense is recognized in the income statement for the period in which the cost matches the sales or the portion of an asset that has expired or used up. On an income statement, expenses are offset by revenue or other forms of income.

By seeing your expenses and your revenue over a period of time, you get a snapshot of the financial health of your company. Where expenses are purchases to increase revenue, expenditures are made to improve the long-term value of the company. There are two types of expenditures: revenue and capital.

Capital expenditures are one-time purchases like vehicles, machinery or real estate that add value to your business. These are also sometimes known as fixed assets.

This costs money, but also adds long-term value in the form of real estate to the business. Instead, it will appear on the company balance sheet, which essentially is a list of what your company owns and what it owes. Another way of looking at it is after expenses are paid, the purchase no longer delivers value to the company. But after capital expenditures are paid for, they continue to deliver value to the company. The initial cost is adding long-term value to his business and is a capital expenditure.

Additionally, the new printer loses value over time. He might get half that. The value lost, along with the maintenance of this piece of equipment, is known as a revenue expenditure and can be written off over the lifetime of the printer. Expenses and Expenditures in Financial Reporting: Income statements, also known as a profit and loss statement, look at revenue and expenses over a specific accounting period—usually three months.

These financial reports help you better see how your business is performing and whether you need to make changes to meet important financial benchmarks. And the income statement is where expenses are reported. Each income statement will have a few features. Cost of Goods Sold COGS : This is how much it takes to produce the items your company sells, including materials, labor, freight costs, etc. There are various ways to calculate this, depending on your industry.

Operating Expenses: This is where you track everything that goes into the day-to-day running of the business. It also includes expenses associated with maintaining and running physical assets.

Fixed operating expenses include things like rent and salaries. Question about English US. What is the difference between expenditure and spending? Feel free to just provide example sentences. Report copyright infringement. The owner of it will not be notified. Only the user who asked this question will see who disagreed with this answer.

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