What are the items purchased by a company referred to as?

The items purchased by a company are referred to as expenses because they represent costs incurred in the process of generating revenue. When a company buys goods or services necessary for its operations, these expenditures are recorded as expenses on the income statement. Expenses can include various categories such as rent, utilities, salaries, and supplies.

Understanding this concept is crucial for financial reporting, as expenses impact a company's profitability and are key to calculating net income. In accounting, differentiating between expenses and other financial terms such as assets, investments, or liabilities is important for grasping how a business manages its resources and expenses.

For instance, while assets refer to resources owned by the company that have future economic value, and liabilities represent obligations that the company owes to external parties, expenses specifically indicate the outflow of resources that has already occurred. This distinction helps clarify the financial position and performance of the company over time.