What are expenses? Explain any two types of expenses.

Expenses — Expenses are the costs incurred by a business or organisation in carrying on its operations, generating revenue and earning income.

Two Types of Expenses:

1. Revenue Expenses — These are recurring expenses incurred during the day-to-day operations of the organisation. Their benefit is consumed within the current accounting year. They do not result in the acquisition of any fixed asset.

   Examples: Salaries and wages, rent, electricity charges, telephone charges, printing and stationery, insurance, repairs and maintenance, audit fees, postage and telegrams.

2. Capital Expenses — These are non-recurring expenses incurred to acquire fixed assets or to improve the earning capacity of the organisation. Their benefits extend over several accounting years.

   Examples: Purchase of building, plant and machinery, furniture, motor vehicles, library books, sports equipment; major repairs that extend the life of an asset.