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What is the difference between expenses and payments?

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Question added by Ahmed Hassanin CMA , Financial Planning and Controlling Manager , Methode Electronics
Date Posted: 2015/07/06
Marline John
by Marline John , Accountant , Aon Middle East

Expense is recorded as and when it is incurred irrespective of payment (means expense has to be reported in the accounting books whether cash/bank payment is made or no), while payment is a mere outflow of cash/bank against an expense incurred or any prepaids.

lakshminarasimham mallareddi
by lakshminarasimham mallareddi , Manager Finance & Accounts , M/s. Vandana Global Limited, Raipur, Chhattisgarh

Expenses are the debit side of Profit & Loss Account, Whereas payments are related to Cash & Bank Book.

Deleted user
by Deleted user

Expenses: Utility consumed

Payment: Only an outflow of economic resources likely cash 

Hussam Disi ACCA
by Hussam Disi ACCA , [Audit Manager] , PricewaterhouseCoopers (PwC)

expenses affect the income statement by decreasing net income/loss, while payments affect the statement of financial position by reducing A/R or A/P. 

Jubril Oyeleke
by Jubril Oyeleke , Cassava production manager , Koye agricultural garden

Expenses is the total amount of money spent on the buying of Industrial Raw-materials for prodution process, which also includes; the amount spent on land which is the RENT the cost of hiring labour which called WAGES and the reward for Capital which is called INTEREST while payment is refer to as what is tendered to a seller or producer in return for the purchased Goods or offered Service, also payment is of two kind which includes; Monnetary payment and trade by barta

Wasim khan wazir
by Wasim khan wazir , Finance Specialist , Mott Macdonald

Expense means outflow of economic resource that might be in future or on the spot.

Payment means direct outflow of economic resource in shape of cash.

Muhammad Irfan Aarbi
by Muhammad Irfan Aarbi , Manager Finance , Hilton Pharma (Pvt.) Ltd

Alltypes of payments not an expenseexpense because we have to pay other then expense like liabilities, capital expenditure ,fixed assets, dividend drawing etc.

Maria Cecilia Arsenal
by Maria Cecilia Arsenal , Bookkeeper , Archor Lending Services, Inc.

Expenses are expenditures. A cost that have been used up. While payments are settlements of certain debts.

Haytham Ahmed
by Haytham Ahmed , باحث قانونى , Prosecution GENERAL

Means expenses exchange one currency for another rate which is about to swap currencies National proportion to each other in the exchange market and then this price is merely a just price for his work in units of work again, and the payments they estimate the money for all commercial and financial transactions between the state and the outside world through a certain time period often years.

Deleted user
by Deleted user

Under the accrual methodof accounting, expenses are costs that have been used up or have been incurred in the process of earning revenues and/or operating a business. For example, a retailer will report its cost of the goods sold as an expense of the period in which the related sales occurred (even if the retailer has not yet paid for the goods, or had paid for the goods in an earlier period). Some expenses are allocations of a cost that was paid in an earlier period (e.g. depreciation of an asset purchased in a previous year, the allocation of a6-month insurance premium). Expenses also include costs incurred in the current period that will be paid in a later period (e.g. current advertising that will be paid for in the next accounting period). Interest on a loan is a daily expense even though all of the interest will be paid when the loan comes due in the next accounting period.payment is a disbursement of money (usually in the form of a check or currency). Some payments are current period expenses (e.g. current month's rent payment) but many payments are not expenses of the current period. Here are a few examples of payments that are not expenses:

  • a payment of $100,000 to purchase the land adjacent to a company will never become an expense
  • payments that are cash dividends to stockholders will never be a corporation's expense
  • principal payments to reduce a loan payable will never be an expense
  • payments to remit payroll tax withholdings will never be an expense
  • payments to reduce liabilities resulting from expenses reported in earlier accounting periods (e.g. payments to reduce interest payable, accounts payable, taxes payable)

Some current period payments will result in expenses in future periods:

  • payments for construction of a building that will be put into service next year
  • payments for an exhibit at next year's trade show
  • payments for services to be received in a future accounting period

Ariston Niel Navarro,    CPA
by Ariston Niel Navarro, CPA , FP&A , Altadis Middle East FZCO (Imperial Tobacco)

Expenses are debits recognize in P&L other than those relating to sales returns, cost of sales/services and losses, such as those expenditures incurred for a particular period regardless of payment or decrease in economic benefits resulting from: depletion/consumption/use of assets and incurrence of liabilities w/c decreases equity other than those relating to distribution to equity particiants. While Payments will credit Cash or Resources in exchange of value received or to be receive in the future.

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