What is an annual expense?

What is an annual expense?

• A. Costs that occur once a year
• B. Costs that remain constant each month
• C. Unexpected expenses that can disrupt a budget
• D. Costs that occur regularly, such as utility bills

Answer: (A)

An annual expense refers to costs that are incurred once a year. This type of expense is significant in financial planning as it allows individuals to allocate funds appropriately without the need to budget for that expense monthly. For example, expenses such as insurance premiums, subscription fees, or property taxes can all be classified as annual expenses, as they require payment only one time per year. Understanding annual expenses helps in creating a comprehensive budget that accounts for all financial obligations throughout the year, ensuring that funds are set aside in anticipation of these larger, infrequent costs. The other choices describe different categories of expenses; some may be recurring but occur at different intervals, while others might represent variable costs or unforeseen financial impacts, which don’t fit the definition of an annual expense.

An annual expense refers to costs that are incurred once a year. This type of expense is significant in financial planning as it allows individuals to allocate funds appropriately without the need to budget for that expense monthly. For example, expenses such as insurance premiums, subscription fees, or property taxes can all be classified as annual expenses, as they require payment only one time per year. Understanding annual expenses helps in creating a comprehensive budget that accounts for all financial obligations throughout the year, ensuring that funds are set aside in anticipation of these larger, infrequent costs.

The other choices describe different categories of expenses; some may be recurring but occur at different intervals, while others might represent variable costs or unforeseen financial impacts, which don’t fit the definition of an annual expense.