When operating a business, money comes in and money goes out. When the money going out is used to pay a bill related to the operation of the business, it is called an expense.
Although there are a few types of expenses, the basic term refers to charges incurred or money paid out as part of operating a business. In order for an expense to become a tax deduction, it has to meet the criteria established by the Internal Revenue Service (IRS). An expense needs to be necessary for the business to remain viable and it must be something ordinary in the field or trade.