Entrepreneurship and Small Business (ESB) Certification Practice Exam

Which of the following is considered a one-time expense for most businesses?

1. Monthly rent

2. Equipment purchase

3. Employee salaries

4. Utility bills

The correct answer is: Equipment purchase

The classification of equipment purchase as a one-time expense makes sense because it typically involves a single, significant outlay of cash for acquiring a physical asset that will be used over a longer period instead of an ongoing expense. This type of investment can be capitalized on the balance sheet and then depreciated over time, reflecting its usage and wear. In contrast, options such as monthly rent, employee salaries, and utility bills represent recurring expenses that businesses incur regularly, often monthly or periodically, contributing to ongoing operational costs. These expenses are essential for day-to-day functioning and typically do not represent a singular financial occurrence like an equipment purchase does. Thus, understanding the distinction between one-time and recurring expenses is crucial for effective financial planning and budgeting within a business.