Frequently Asked Questions

What expenses are included in operating expenses?

Operating expenses, also known as operating costs or business expenses, are the costs associated with running a business's day-to-day operations. These are the costs that a company incurs as a part of its normal business operations, excluding the cost of goods sold. They’re essential to understand as they directly impact the profitability of a company. Operating expenses typically include costs such as rent, utilities, payroll, and marketing costs. More specifically, they can be broken down into marketing and administrative expenses. Marketing expenses can include costs such as sales salaries, collateral and promotions, advertising, and expenses related to travel, meetings, and client meals. Administrative expenses, on the other hand, can include office salaries, rent, and utilities. In addition to these, operating expenses can also include depreciation and amortization. These are the expenses incurred on tangible and intangible assets. Since these assets don’t lose their utility in a single accounting period, the total cost of assets is spread over their total lifetime. The cost applicable for a single accounting period is deducted from revenue as depreciation.