Mortgage payments: If you own your company’s building, you may have mortgage expenses. Location expenses are the costs it takes to secure a business location. Here are 18 common categories for business expenses you might encounter in your financial or accounting career: 1. When tracking business costs, it can be helpful to organize them into categories. Related: Different Expense Types and How to Budget Them 18 common business expense categories Examples include emergency equipment repairs and annual bonuses. Periodic: These expenses happen occasionally across different reporting periods. Examples include shipping costs and utility payments. Variable: These expenses change throughout the reporting period. Examples include rent or insurance payments. They include:įixed: These expenses remain the same over reporting periods. There are three major types of business expenses. Read more: What Are Business Expenses and How Are They Recorded? Types of business expenses A tax professional can provide further information on specific deduction regulations and industry standards. Some expense categories are fully deductible, while others are partial. “Necessary” means the expense helps conduct your business operations and is appropriate for your organization.Īn expense that meets the definition of ordinary and necessary for business purposes may be expensed for tax purposes. “Ordinary” means the expense is common to most businesses in the same trade or industry. The federal Internal Revenue Service (IRS) determines if an expense is deductible by considering if it is ordinary, or common within the industry, and necessary. Some expense categories are tax-deductible, helping a company reduce its tax liability. Costs are subtracted from revenue to determine a company’s taxable income. You must know a business’s expenses to calculate a final net profit. Expenses are also a part of a company’s income sheet. When you know all of a company’s expenses, you can create a more accurate budget and track spending.

Read more: How To Report Business Expenses What are business expenses?īusiness expenses are costs associated with running a company. In this article, we explain what business expenses are, discuss the various types of expenses and list 18 common expense categories you might find in your accounting or financial career.īusiness expenses are incurred as part of a company’s operations.īusinesses subtract their expenses from their revenue to determine their net profit or loss and taxable income.Īn expense must be considered as ordinary and necessary by the IRS to be tax-deductible. Understanding a company’s expenses and knowing which ones are tax-deductible can also help you prepare a company’s taxes.

Accountants and financial leaders can use these expenses to create a company budget, produce income statements or file tax reports. Organizations typically accrue some costs during the course of doing business.

Daily expense sheet for small business