I. What Are Business Expenses?

II. Categorize Business Spending

on Business Taxes
II -1. Fully Deductible Expenses
II-2. Partially Deductible Expenses
Business Operation II-3. Non-Deductible Expenses
Expenditure
III. Fixed Expenses, Recurring
Expenses, Non-Recurring
Expenses, Whammy Expenses

IV. Direct Costs & Indirect Costs &

Interest On The Income Statement
 I. What Are Business Expenses?
● Business expenses are costs a business owner incurs while operating his business.
● They are recorded expenses for business on business income statement and
subtracted from revenue to arrive at a company’s taxable net income.
● There are some common business expenses:
 Rent or mortgage payments
 Office equipment
 Payroll costs (e.g., wages, benefits, and taxes)
 Advertising and marketing
 Utilities
 Small business insurance
 Depreciation
 Loan payments
 Interest payments
 Business fees (licenses, permits, subscriptions, etc.)
 II. Categorize Business Spending on Business Taxes

Fully Deductible Expenses Partially Deductible Expenses Non-Deductible Expenses

The 100 percent tax deduction  The percentage of tax  Some business
is a business expense for which withheld on business expenses are not
a business owner can claim a sales can cut business deductible.
100 percent tax deduction costs depending on the
based on his or her business business model and
income statement. budget.
 II -1. Fully Deductible Expenses
Some Taxable Income Can Be Written Off As Business
Expenses And Be Claim The Most Deductions Possible
 Car expenses and mileage
 Office expenses, including rent, utilities, etc
 Office supplies, including computers, software, etc
 Health insurance premiums
 Business phone bills
 Continuing education courses
 Parking for business-related trips
 Business-related travel expenses,
including flights, rental cars, hotels, etc.
 Postage
 II-2. Partially Deductible Expenses
Some Taxable Income May Be Partially Tax Cuts
 Meals and entertainment
 Gifts of nominal value
 Employee wages
 Advertising expenses
 Self-employment tax
 II-3. Non-Deductible Expenses
Non-deductible expenses include:
 Lobbying expenses
 Political contributions
 Governmental fines and penalties (e.g., tax penalty)
 Illegal activities (e.g., bribes or kickbacks)
 Demolition expenses or losses
 Education expenses incurred to help you meet minimum
 requirements for your business
 Legal fees incurred to acquire business assets (usually)
III. Fixed Expenses, Recurring Expenses, Non-Recurring
Expenses, Whammy Expenses
Fixed Expenses Non-
Recurring Expenses
Recurring Expenses Whammy Expenses
Fixed costs are  A Recurring  Non-  Whammies are
set over a Cost is a regularly recurring items the most
specified period of occurring cost or are those set of frustrating kind of
time and do not estimated cost whic entries that are expenses. These
change with h is documented found inthe are for the most
production levels. with one record— income statement part
Fixed costs can a Recurring that is unusual unpredictable.
be direct or Cost record—that and Think of some
indirect expenses describes the is not expected worst-case
and therefore may income during the regular scenarios
influence or expense and its business
profitability at pattern (the time operations;
different points period during which
along the income the cost applies,
statement. and so forth).
IV. Direct Costs & Indirect Costs & Interest On The Income
Statement

Indirect Cost Direct Cost Interest On the Income

Indirect expenses are Direct  Interest income is the
those expenses that costs are expenses tha amount earned by an
are incurred to t a company can easily investor’s money that he
operate a business as connect to a specific places in an investment or
a whole or a segment "cost object,“ it can project. A very simple and
of a business, and so also include labor, basic way of computing it is
cannot be directly assuming the labor is by multiplying the principal
associated with specific to the product, amount by the interest
a cost object, such as a department or project. rate applied, considering
product, service, or the number of months or
customer. years the money is lent.