What is Expense?

An expense is the cost incurred by a business in the process of generating revenue. Expenses are recorded on the income statement and are subtracted from revenue to determine a company's profit or loss. Effectively managing expenses is crucial for a startup's profitability and cash flow.

For Startups: Startups must categorize their expenses correctly to understand their cost structure. Major expense categories include Cost of Goods Sold (COGS), Sales & Marketing, Research & Development (R&D), and General & Administrative (G&A). Tracking these categories helps founders identify areas of overspending and manage their burn rate.

Example: A SaaS startup's monthly expenses might include ₹5 Lakhs in salaries (an operating expense), ₹2 Lakhs in server costs (a cost of revenue), and ₹3 Lakhs on marketing ads (an operating expense).