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Expanse and expenditure

Expanse and expenditure

In accounting expanse is a cost that have been expired and involve with earning revenue. The expanse is a cost to earn revenue.  Expenditure may be an expanse with certain condition.  Expenditures is a payment and disbursement. The expenditures includes payment,  reduction of liabilities,  distribution.  Expenditure sometimes may be consider as expanse.  Sometimes it may not considered as expanse. 

Expenditures to eliminate or reduce liabilities is not considered as expanse.  On the other hand salaries,  advertisements etc can be consider as expanse. 


Another example can be given when an expenditure turns into expanse.  Purchased equipment by a company is the expenditures. Exactly,  when the equipments are purchased then it is considered as an expenditure. But the equipment is used during six accounting period.  Under the straight line method of depreciation will be happen.  The depreciation during six accounting period may be considered as expanse.

The above example is appropriate to distinguish expanse and expenditure as well as can explain how an expenditure become expanse.


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Cost and expanse

Cost In accounting cost and expanse is so far different terms. Expanse is the cost that is incured to earn revenue. Not each of the cost  is consider as expanse.  Only these cost is considered as expanse that is concerned with earning revenue. Cost may be an asset or an expanse. The condition is important when we will define expanse or not.  Let us consider a few example that can define how we say cost as an expanse. The purchased equipment for a company initially be consider as the assets of the company.  But after a certain accounting period a portion of its value will be used.  A portion of the cost is expired.  This expired cost of the equipment is considered as the depreciation expanse. In that way any purchased value may be considered as asset  and expanse. Any unexpired cost is considered  as an asset. If a company purchases land for its business operation then the land cost is an assets of the company and it will never be e...

Time value of money

Time value of money Time value of money means the receivable money is today is more valuable than if it received in next year in accounting period.  There have a certain cause of happening that.  If any company received money today, there creates an opportunity to invest a portion of received money and can gain earn from investment.  If any company received 1000 dollar today and invest 8 parent in business to earn and finally profits 80 dollar in accounting period.  The receivable amount will reach in 1080 dollar.  Hence,  the received amount today 1000 dollar is equal to the received amount 1080 after a one year of accounting period. The time value money of 8 percent means that today's receivable money is equal to 8 percent more than one year next receivable amount.