What is an Expense?
In the simplest terms, an expense is an outflow of money to another company or individual as payment for services rendered or an item acquired.
In other terms, it is anything that leads to the reduced value of the owner. Thus, if something increases a company’s liability, it can be defined as an expense.
Types of Expenses
There are two main types of expenses. It is important that you understand what are fixed expenses and what are variable expenses when using a record expenses app. It will ensure that there is reliability in the results that you get. So:
What are fixed expenses?
Fixed expenses are those which remain constant and are recurrent. It does not matter if your company makes sales or not. For instance, rent which or electricity bills that you have to pay every month.
What are variable expenses?
Variable expenses are these which change directly with a change in sales volume. These costs include hourly wages, the costs of goods sold, and shipping costs.
How to calculate expenses?
It is quite easy to understand expenses. You simply calculate the amount of money you have spent to get to the final stage of the production process. Without understanding its expenses, a company would soon be declared bankrupt.
At times, the costs associated with an expansion make it an unprofitable move. Thus, understanding costs after each process can help you to improve your business profitability.
Simplify Expense Calculation with MoneyPenny
One of the easiest ways to calculate expenses is to use an automated method, like MoneyPenny Expense Tracking. It will help you to track all expenses and calculate them automatically. The result is that you can:Use Record Expenses App and Continue growing your business with MoneyPenny Click To Tweet