Many people may get the terms expenditure and cost confused, or they may think of these two terms as being one in the same. You can tell the difference between an expenditure and a cost easily. The difference is determined by what happens after you've paid for an item or service.


An expenditure is when you spend money but you receive no financial benefit from the expenditure. For example, if you own your own company and you decide you need business card. If you spent $200 for business cards but you never hand the cards out to anyone, you won't gain any business (i.e. money) from the cards. Therefore, you have not received any financial gain from the purchase of the business cards. In business terms, the purchase of the business cards would be an expenditure rather than a cost.


Cost, like an expenditure, is also when you spend money. But in business terms, a cost is when you spend money, but you also receive financial benefits from the cost made. For instance, let's say you own your own coffee company; although you have to spend money purchasing coffee beans and grounds, you will recoup this money and make a profit in your coffee sales. The coffee beans and grounds purchases would be a cost because you'll see a direct financial gain.

The Gray Area

Costs, in some situations, can refer to spending money that "may" bring you a financial benefit. For example, if you purchase $200 worth of business cards but you never hand them out, this would be an expenditure because you're not increasing revenue with the business cards sitting on your desk. However, if you purchase the business cards, hand every one out, but still see no financial gain, some businesses will count this as a cost since there is a chance that you "may" see a financial gain somewhere down the road.


The term expenses can further confuse those trying to understand expenditures and costs. A common term used in accounting and businesses along with expenditure and cost, an expense is also money spent. An expense is a cost of money, but one in which you know will further decrease your revenue and income. For example, if you own your business you will have to pay your employees. The money paid to your employees is an expense because you will be using business revenue to pay them accordingly. Although necessary, expenses are the "cost" of owning your own business.