What are Company Expenses?

Mary McMahon

Company expenses are costs incurred as part of the daily process of running a business. Expenses do not involve costs associated with acquiring and maintaining business assets, a potential investment in the future of the business. Rather, they consist of a variety of costs associated with activities necessary for running the business, like gas to fuel a company car, or paper for company printers. Usually, companies are allowed to deduct expenses from their tax liability.

Travel costs are part of a company's expenses.
Travel costs are part of a company's expenses.

Maintaining logs of company expenses is critical. Companies want to keep track of costs associated with running the business so they have an idea of how much the company costs to run. This also allows them to identify areas where they could cut costs, freeing up funds for investment. For companies with financial problems, cutting expenses may be a critical part of restructuring the company to make it functional. The company may trim away unnecessary expenses and advise staff members to use moderation when incurring expenses for their activities.

A company car is considered an expense.
A company car is considered an expense.

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In addition to being important for internal accounting, logging company expenses also allows people to claim them on tax returns. Staff members must maintain a clear, itemized list of expenses, including details about what money was used for. Expenses are divided into a number of different categories for tax purposes, including things like entertainment and office supplies. When filing taxes, companies do not need to include their receipts and other proofs of purchase, but they do need to retain this information in case of an audit.

Some companies allow their employees some autonomy in incurring company expenses. People who need to travel or entertain for work may be ordered to submit receipts and charts of their expenses for reimbursement and accounting. These employees are authorized to spend funds up to a certain amount as part of their work; for instance, talent agents are authorized to take clients and potential business partners out to lunch as part of the deal negotiating process, and utility workers can fuel up their vehicles to make their rounds.

Controlling company expenses can be a complex task, especially if a company has a history of very loose expensing policies. Employees must be acquainted with new restrictions, and some leeway may needed to be provided for special circumstances. Accounting personnel are usually involved in the development of expense policies, as they are most familiar with the areas of excess expense and the average costs for a variety of activities, ranging from making copies to traveling to conferences.

Some companies allow employees autonomy in incurring car and other corporate expenses.
Some companies allow employees autonomy in incurring car and other corporate expenses.

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