Expenses are integral to the operation of any business and can best be defined as costs a company incurs in order to generate revenue. Expenses can also be written off as tax-deductible deductions on a company’s income tax returns, as long as they meet the Internal Revenue Service’s (IRS) guidelines.

Accountants use two different methods to record expenses. The cash basis method records expenses when payments are made, while the accrual basis method records transactions when they are incurred. Both of these methods are widely accepted in the accounting field.

Business expenses are typically divided into two categories: operating expenses and non-operating expenses. Operating expenses are those that are incurred as a result of day-to-day business activities. Examples of operating expenses include rent, salaries, office supplies, and utilities. Non-operating expenses, on the other hand, refer to expenses that are only incurred from external sources such as legal fees, interest payments, and purchase of new equipment.

Capital expenses are a type of business expense that is treated differently than the other types of expenses by the IRS. This type of expense represents the cost of an asset that is expected to remain in service for more than one year. Capital expenses are generally classified as either depreciable or non-depreciable. Depreciable assets are considered to be used up over time and are placed on the balance sheet for cost recovery purposes. Non-depreciable assets are considered to be indestructible and require different accounting rules.

In short, business expenses are the costs a company incurs in order to generate revenue and they can be written off as tax-deductible deductions on a company’s income tax returns, as long as they meet the IRS’s guidelines. Operating expenses and non-operating expenses are the two main types of business expenses and the IRS has specific rules for how capital expenses are handled. It is important to understand how to properly record and account for business expenses in order to gain the most benefit come tax time.