Some of the “expenses” recorded in financial accounting should be treated as “investments” and some amounts not spent during a financial accounting period included as “expenses.” Doug Hicks, CPA discusses why and when this should be the case.

Periodicity is important in financial accounting. Expenses are measurements of the resources consumed during a specific period of time using measurable and auditable historical information in compliance with man-made rules and regulations.

Managerial accounting, on the other hand, is more concerned with the long-term, sustainable economics of an organization. Expenses are measurements of the resources that need to be consumed for the organization to sustain its business over the long-term whether or not those resources are consumed during a specific period of time. Find out more in this podcast.