What do expenses represent?

What do expenses represent?

• A. Liabilities
• B. Dividends
• C. Costs of providing goods and services
• D. Gains

Answer: (C)

Expenses are the costs incurred in the process of earning revenue during a period. They reflect the using up or consumption of assets or the incurrence of liabilities to provide goods or services to customers, and they are recognized on the income statement to match with the revenues earned. Examples include wages, rent, utilities, and depreciation. These are not liabilities (obligations to pay in the future), not dividends (distributions to owners), and not gains (increases from peripheral or incidental transactions).

Expenses are the costs incurred in the process of earning revenue during a period. They reflect the using up or consumption of assets or the incurrence of liabilities to provide goods or services to customers, and they are recognized on the income statement to match with the revenues earned. Examples include wages, rent, utilities, and depreciation. These are not liabilities (obligations to pay in the future), not dividends (distributions to owners), and not gains (increases from peripheral or incidental transactions).