![]() This information will help you if you are a director or shareholder of a company that operates a small business. The term expenditure first appeared in the English language in 1769, with the meaning “act of expending.” It came from the Medieval Latin word “Edpenditus,” the past participle of “Expendere,” which means “to pay out, to weigh out.” In 1791, the term also began to mean “that which is expended.Wondering what the best way to take money out of your company is? Or how to correctly use company assets for personal use? Etymology of expenditureĮtymology is the study of the origin of words, phrases, and expressions, and how their meanings evolved over time. People who believe governments can and should trigger economic growth by spending more, specifically during a recession, are known as followers of Keynesian Economics. John Maynard Keynes (1883-1946), a British economist, believed that governments could significantly change economic performance by adjusting expenditure and tax rates. Reducing interest rates is a monetary policy decision, while reducing spending on defense is a fiscal policy decision. Monetary policy, on the other hand, includes a central bank’s decisions to manage the money supply to control inflation, and make sure the economy thrives. Someone who believes that fiscal policy is crucial in economic regulation is a fiscalist. Additionally, in times of recession, they adjust their policy to kick-start the economy.” “Through fiscal policy, governments attempt to bring down unemployment and stabilize business cycles. In a previous Market Business News article about fiscal policy, we wrote: When GDP growth is sluggish, government spending may rise to kick-start the economy. In other words, how much it spends, borrows, and taxes its people and businesses. Fiscal policyįiscal policy refers to government expenditure and income. Governments finance their expenditure through taxes and borrowing. Government expenditure or government spending includes all the money that a government paid out. While the spending takes place, we call them operating expenses. In most cases, this type of spending is for financing the company’s day-to-day or ongoing operations. In this context, short-term refers to less than 12 months. When a business spends money or invests in something with a short-term benefit, we class it as a revenue expenditure. “As a result, many companies often finance the project using either debt financing or equity financing.” Revenue expenditure “Such an asset, therefore, requires a substantial amount of initial investment and continuous maintenance after that to keep it fully functional.” Regarding the acquisition of this type of asset, the Corporate Finance Institute wrote: Most money spent to expand a business or purchase a new asset that will boost income over the long term are types of expenditure. When a business buys an asset which has a useful life of at least one year, i.e., a non-current asset, we class that spending as a capital expenditure. Money that businesses and other organizations keep on the premises for expenditure on small or miscellaneous items is called petty cash. We can also use the term when talking about time or effort used, as in: “The expenditure of time and effort on that project was huge.” ![]() “Obligatory settlements or payment of liabilities such as invoices, receipts, and vouchers can also be considered expenditures.” ![]() This could be anything from purchases equipment to hiring employees.” “These are payments of currency or barter credits for necessary inputs (goods or services). My Accounting Course has the following definition of the term: Put simply, it means using a resource for business operations. In business, for example, the term refers to the money a company uses to obtain new assets, maintain or improve current ones, or reduce debt, i.e., reduce a liability. Anything a person, company, organization, government, or other entity spends on goods, services, or to reduce a debt is expenditure. It is the action of spending money, as in: “Government expenditure of taxpayers’ money increased significantly last year.”. ![]()
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