An expense is any cost a business incurs to operate and generate revenue. It is the money going out — from rent and salaries to raw materials and marketing. Expenses reduce your net income and are recorded on the income statement.
Expenses are broadly divided into operating expenses (rent, wages, utilities) and non-operating expenses (interest payments, currency losses). There are also capital expenses (buying long-term assets) which are treated differently — they are depreciated over time.
Tracking and controlling expenses is fundamental to profitability. Revenue minus expenses equals profit — so every dollar saved in expenses is a dollar added to the bottom line.