Understanding Expenses for Business Owners

The video tutorial explains what an expense is, defining it as the cost of an asset or service used to earn revenue. It emphasizes the importance of recognizing when an expense occurs, which is when the asset or service is used. The tutorial provides examples such as electricity and internet bills as business expenses. It also discusses the timing of expensing items, using the example of stamps, which are only expensed when used. The key takeaway is understanding when to expense items in a business context.

What is the basic definition of an expense in a business context?

• A revenue generated from services

• A loan taken from a bank

• A profit made from selling goods

• A cost that is incurred to earn revenue

Which of the following is considered an expense for a business?

• Electricity bill used for business operations

• Personal grocery shopping

• A loan repayment

• A gift received from a client

Why is an internet bill considered an expense for a business?

• Because it is a personal expense

• Because it is a variable cost

• Because it is a fixed cost

• Because it is used to generate revenue

When do stamps become an expense for a business?

• When they are stored in the office

• When they are delivered to the post office

• When they are purchased

• When they are used on envelopes

What is crucial to determine about an item before expensing it?

• Its purchase price

• Its usage in generating revenue

• Its color and size

• Its brand and model