Ordinary and Necessary

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Ordinary and Necessary

Expenses that a company incurs in the course of its operations. O&NE expenses include the office electric bill, materials needed to make a product, and employee wages. O&NE expenses differ from startup expenses; while O&NE are deductible from the company's taxes in the year they are incurred, startup expenses generally must be amortized over several years. The IRS provides guidelines as to what expenses are both "ordinary" and "necessary" in Section 162(a) of the tax code.