Accounting Question, Please Help

Question

1. What does it mean when a company has a major expense? Like for example, "The major expense for Dollar Tree Inc. is called Cost of Goods Sold, which represents the cost of the goods Dollar Tree sold to it's customers". But isn't expense a cost, it decreases net income? I did not understand this statement.

Answer 1

Hello, Lola,

Good question. "Major expense" is a vague term and I'm actually not sure there is a formal definition. When I see "major expense," I envision an unexpected expense, or one that is unusual for a company. It depends how it is used in a sentence. Some examples:

1. ABC Corp's cost of goods sold is a major expense since they manufacture everything in the US, unlike their competitors, who find lower costs when sourcing overseas. "Major expense" in this sentence is merely descriptive of a company's financial heatlh.
2. ABC's settlement of FCC claims of false advertising be reflected a major expense in the coming fiscal quarter. Here, "major expense" signifies a large, one-time event.

Bob