What is R&D Expense?
Research and development (R&D) expenses are costs associated with the research and development of a business’s goods or services. Companies generally incur R&D expenses when trying to revamp a current product or service in hopes to continue innovating new product and service ideas. R&D expenses are deducted directly from the revenue generated within an accounting period.
Research and Development Expenses in Business
In order for companies to continue to create new products and services, they must invest capital heavily into research and development to produce new products and services. Technology companies tend to spend more on R&D due to the nature of their products and services being unique and technology-focused. For example, Apple can spend millions of dollars on developing the next-generation iPhone. Another example may be a pharmaceutical company conducting research on how new drugs will affect consumers. R&D is crucial for businesses to stay relevant in today’s ever-changing world.