What is the difference between expenditure and expense

They are the total amount or the entire bill of purchases made at an instance. The words expense and expenditure have similar meanings. The word expense could mean day-to-day purchases made by a citizen such as rent or food, and for a company, it could mean the payment of salaries of employees. Expenditure, on the other hand, are long term investments made by individuals, or the total amounts received by a company after the purchase of property or assets.

Understandably, the two words have differences in terms of the period in which they are calculated as well as the size of the investment. What is Expense? What is Expenditure? Main Differences Between Expense and Expenditure Expenses can be used to talk about either a single purchase out of many or any purchase made in the past.

Expenditure is used when referring to a whole list of investments or any form of disbursement. Through a business standpoint, an expense is a strategic purchase made by companies to increase their revenue. Operating expenses are expenses incurred during regular business, such as general and administrative expenses, research and development, and the cost of goods sold.

Operating expenses are much easier to understand conceptually than capital expenses since they are part of the day-to-day operations.

All operating expenses are recorded on a company's income statement as expenses in the period when they were incurred. Operating expenses include a wide range of expense types , from office supplies and travel and distribution expenses to licensing fees , utilities, property insurance, and property taxes. If equipment is leased instead of purchased, it is typically considered an operating expense.

General repairs and maintenance of existing fixed assets such as buildings and equipment are also considered operating expenses unless the improvements will increase the useful life of the asset. In running its business, a company sometimes has a choice of whether to incur an operating expense or a capital expense. For example, if a company needs more storage space for housing its data, it can either invest in new data storage devices as a capital expense or lease space in a data center as an operational expense.

A capital expenditure is incurred when a business spends money, uses collateral , or takes on debt to either buy a new asset or add to the value of an existing asset with the expectation of receiving benefits for longer than a single tax year.

Essentially, a capital expenditure represents an investment in the business. Capital expenses are recorded as assets on a company's balance sheet rather than as expenses on the income statement. The asset is then depreciated over the total life of the asset, with a period depreciation expense charged to the company's income statement, normally monthly. Accumulated depreciation is recorded on the company's balance sheet as the summation of all depreciation expenses, and it reduces the value of the asset over the life of that asset.

Examples of capital expenses include the purchase of fixed assets, such as new buildings or business equipment, upgrades to existing facilities, and the acquisition of intangible assets, such as patents. Financial Statements. Financial Analysis. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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Operations Books. Articles Topics Index Site Archive. About Contact Environmental Commitment. What is an Expense? What is an Expenditure? Comparing Expenses and Expenditures The key difference between an expense and an expenditure is that an expense recognizes the consumption of a cost , while an expenditure represents the disbursement of funds.