This reduction is reflected in the “Cash and Cash Equivalents” line item on your balance sheet. Balance Sheet – Assets: If you paid for the office supplies with cash, your cash balance decreases by $10,000.This reduces your net income (or increases your net loss) for that period.

Income Statement: Your office supplies expense of $10,000 is recorded on your income statement for the period.This transaction affects your financial statements as follows: Let’s say you’re running a company, and you spend $10,000 on office supplies. So, while expenses do not appear directly on the balance sheet, they are part of the broader financial picture and have effects that can be seen on the balance sheet. If expenses increase, net income will decrease (assuming revenues stay constant), which in turn reduces the increase in retained earnings and therefore shareholders’ equity. Reduction in Equity: Net income, which is revenues minus expenses, is added to retained earnings (part of shareholders’ equity) at the end of the period.

Increase in Liabilities: If an expense has been incurred but not yet paid, it would increase a company’s liabilities in the form of accounts payable or accrued expenses.

For instance, if a company spends cash to pay salaries, the “Cash and Cash Equivalents” line item on the balance sheet would decrease.

Reduction in Assets: If an expense involved the use of an asset or cash, the value of that asset on the balance sheet would decrease.

However, while expenses themselves do not appear on the balance sheet, they can indirectly affect the balance sheet in a few ways: The income statement shows a company’s revenues and expenses over a specific period of time, such as a quarter or a year, and calculates the company’s net income (or net loss) by subtracting expenses from revenues. No, an expense does not appear directly on the balance sheet.Įxpenses are recorded on the income statement, not the balance sheet. Does an Expense Appear on the Balance Sheet?

Are expenses liabilities