Course Outline
Join PRO

What is the difference between expense and loss?

Author:
Harold Averkamp, CPA, MBA

Definition of Expense

An expense is a cost that a company incurs or uses up when it earns revenues.

Examples of Expenses

A few examples of the many expenses that a company incurs in earning revenues are:

  • Cost of goods sold
  • Sales commissions expense
  • Delivery expense
  • Rent expense
  • Salaries expense
  • Advertising expense

Definition of Loss

A loss could have several meanings. The following examples illustrate how the term is used.

Examples of Losses

Some examples of losses include:

  • The sale of a long-lived asset for an amount that is less than the asset’s book value
  • An unfavorable settlement of a lawsuit against the company
  • The retirement of bonds payable at a cost that is greater than the carrying value of the bonds

Loss is also used to describe write-down of inventory from cost to market.

Finally, loss is also used to describe the bottom line of an income statement that reports expenses in excess of revenues.

The FASB’s Statement of Financial Accounting Concepts No. 6 (December 1985) discusses expenses and losses in paragraphs 80-89. You can access this concepts statement at no cost at www.FASB.org/st by selecting “Concepts Statements”.

Join PRO to Track Progress

Features

Free

PRO

Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Dictionary
Bookkeeping Video Training
Financial Statements Video Training
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Flashcards
Crossword Puzzles
Word Scrambles with Coaching
Bookkeeping Study Guide
Managerial and Cost Accounting Study Guide
Certificates of Achievement
Bookkeeping Certificate of Excellence
Business Forms
Printable PDF Files
Progress Tracking
Motivational Badges and Points
Motivational Medal Rankings
Motivational Activity Streaks
Public Profile Page of Achievements

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Read 3,033 Testimonials

PRO for Teams
  • Easily onboard new users and team admins
  • Monitor individual user progress and grades
  • Monitor team progress and compare users
  • View average grades and find problem areas
  • Monitor recent activity and user achievements
PRO for Teams
Take the Tour Join Pro Upgrade to Pro