Future Business Leaders of America (FBLA) Accounting Practice Test

What type of account records the costs associated with running a business?

1. Asset

2. Revenue

3. Expense

4. Capital

The correct answer is: Expense

The correct answer is expense because expense accounts are specifically designed to track and record the costs incurred while operating a business. These costs can include rent, utilities, salaries, and other operational expenditures that are essential for maintaining the daily functions of the business. When expenses are recorded, they are categorized to provide clarity on where money is being spent, which is vital for financial reporting and management decision-making. Understanding expenses is crucial for assessing profitability, as they directly impact the net income of the organization. This financial transparency allows businesses to analyze their spending patterns and make informed decisions to manage costs effectively. In contrast, asset accounts track resources owned by the business that provide future economic benefits, revenue accounts record the income generated from operations, and capital accounts refer to the owner’s investment in the business. While all these accounts are necessary for a complete financial picture, it is the expense account that specifically captures the costs associated with business operations.