This week’s blog will be short and sweet. I was having a conversation with a client and she kept saying expenditure and I kept saying expense. When finally she asked, “Well what’s the difference?” Well believe it or not, there is a difference. A subtle one – but a difference none the less. And depending on who you are speaking to it can affect the results of the tasks you are performing. So this blog is for her.
Expense is defined as the amount of money spent in order to buy or do something.
In the world of accounting, expense is used when the full accrual method applies. It is an item that is reported on the profit and loss statement. It refers to costs that are used up. Everything you pay out is some type of expense: advertising expense, telephone expense, lease expense – and the list can go on. You will hear this term used more often in a for-profit and not-for-profit world.
Expenditure is defined as an amount of money spent, as a whole or on a particular thing.
On the other hand, expenditure is used when the modified accrual method applies. It is an actual payment or disbursement. Most often expenditures are an expense however an expense is may not be an expenditure. In the case of depreciation, this is an expense that appears on your profit and loss but it is not an actual payment and therefore is not an expenditure. This term is used more in the governmental world where fund accounting lives and breathes.
To learn more about the world of accounting and how it affects your business, email firstname.lastname@example.org to schedule a discovery session.
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