What are 2 examples of discretionary spending?
|
Show
What is a discretionary expense?Expenses, whether for potential audits or to save money. However, it remains a type of spending that is not strictly necessary, meaning that the business could still function even if all discretionary spending stops. A business or organization has the “discretion” or choice when it comes to this kind of expense, for example, meals at restaurants or entertainment costs. It is important to have an efficient system for filing and tracking these and other kinds of expenses. Difference between discretionary spending & essential expensesThe main difference between an expense that is “discretionary” and one that is “essential” is that the former is not essential for the day-to-day operation of a business (i.e. dinner) and the latter is (i.e. office rent). Tracking both kinds of spending or expenses is important for healthy accounting. When it comes to this kind of tracking, a business or organization must have an overall expense policy: system and protocols in place so that the relevant parties (employees, clients, etc.) know what types of expenses they can file and how to do so. There are many different kinds of expense or spend management solutions and tools available, including those that are automated or AI-driven, which allow the organization to more easily sort and approve expenses; run reports; and and perform analyses on spending. Types of Discretionary ExpensesIn the corporate sphere, discretionary expenses are usually related to a company’s standing or clout, and can be applied to employees and/or clients. Often, this type of spending is related to a company’s long-term profitability. However, what is considered discretionary or nondiscretionary (i.e. essential), is subjective and may vary from business to business. Types of discretionary spending include:
What is an example of a non discretionary expense?A nondiscretionary, or essential expense is an expense directly related to the operation of a business or organization. This may include but is not limited to the following:
What defines an expense as discretionary or non discretionary is subjective and also dependent on the sector. For example, while paying for gas may not be considered essential in the restaurant industry, it could be considered essential for logistics or shipping companies. How important is discretionary spending?Spending in this way can be intrinsically connected to workplace morale and/or a company’s standing in its sector. In some industries, maintaining a certain level of discretionary spend may help maintain a company’s reputation and therefore help it to keep or attract clients, ultimately increasing profitability in the long run. Although often taken into consideration for a company’s long-term profitability, this type of spending can often be restricted or postponed in a current period. In fact, discretionary costs are often the first place an organization looks to pull back on. Have
any questions and do you want more? Don’t hesitate to contact the Jenji team at . Recommended textbook solutionsPrinciples of Economics8th EditionN. Gregory Mankiw 1,335 solutions  Century 21 Accounting: General Journal11th EditionClaudia Bienias Gilbertson, Debra Gentene, Mark W Lehman 1,012 solutions Principles of Economics7th EditionN. Gregory Mankiw 1,394 solutions Statistics for Business and Economics13th EditionDavid R. Anderson, Dennis J. Sweeney, James J Cochran, Jeffrey D. Camm, Thomas A. Williams 1,692 solutions What is a discretionary example?Discretionary costs (avoidable costs) are costs or capital expenditures that can be curtailed or even eliminated in the short term without having an immediate impact on the short-term profitability of a business. Examples of discretionary costs include advertising, maintenance, training, R&D, etc.
What is considered discretionary spending?In American public finance, discretionary spending is government spending implemented through an appropriations bill. This spending is an optional part of fiscal policy, in contrast to social programs for which funding is mandatory and determined by the number of eligible recipients.
Is Social Security an example of discretionary spending?Many programs that provide benefits to individuals are classified as mandatory spending, such as Social Security, Medicare, and Medicaid.
Which of the following is an example of discretionary costs?Examples of discretionary costs are advertising, building maintenance, contributions, employee training, equipment maintenance, quality control, and research and development.
|
