Final answer:
An expense typically decreases stockholders' equity in a corporation, as it reflects outflows of resources reducing the value of the company and negatively affecting net income.
Step-by-step explanation:
An expense in accounting terms generally refers to money spent or costs incurred in an entity’s efforts to generate revenue, which may result in a decrease in the owner’s equity or the company’s net worth on the balance sheet. When a corporation incurs an expense, it will typically decrease stockholders' equity because it represents an outflow of funds that reduces the overall value of the company. Expenses in a corporation are not the same as liabilities; rather, an expense impacts equity, whereas a liability is a present financial obligation that the company needs to settle in the future.
An expense will decrease an asset when the cash is spent or will increase a liability if the expense is to be paid in the future. However, the common impact is an immediate reduction in equity, since expenses negatively affect the net income, which is a component of stockholders' equity.