What is considered an 'expense' in accounting?

In accounting, an expense is understood as the costs incurred by a business in the process of generating revenue. This encompasses various costs such as rent, wages, utilities, and raw materials. These expenses are crucial for the operation of the business and directly influence the net income reported in financial statements. When expenses increase, they reduce the net income of a company, indicating that the entity is investing in its operational capabilities to drive future profits.

Choosing option B highlights the fundamental relationship between expenses and net income. Understanding this relationship is essential for assessing a company's financial health and operational efficiency. The recognition of expenses allows for accurate reporting of profitability, as it represents the outflow of resources in the pursuit of income.

In contrast, other options describe concepts that do not fit the definition of an expense. For example, funds deposited into investment accounts represent an asset rather than a cost associated with generating revenue, while monetary gains derived from investments are classified as income, not expenses. Additionally, sales made to customers reflect revenue, which is the income generated from business activities, rather than expenses that reduce that income. Such distinctions are vital for proper financial analysis and reporting.