What is the concept of operating expenses in accounting?

by josie_rohan , in category: Taxation and Accounting , a year ago

What is the concept of operating expenses in accounting?

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1 answer

by fred.nader , a year ago


Operating expenses are the ongoing costs incurred by a business in order to maintain and run its day-to-day operations. These expenses are not directly associated with producing or purchasing goods or services for resale, but rather with the normal functioning of the business itself.

Operating expenses typically include items such as rent, utilities, salaries and wages, insurance, advertising, marketing, repairs and maintenance, office supplies, and any other expenses directly related to running the business. These costs are necessary for the company to generate revenue and remain operational.

In accounting, operating expenses are recorded on the income statement and are deducted from a company's gross revenue to calculate its operating profit or loss. They are essential for assessing the profitability and financial performance of the business. By managing and controlling operating expenses, a company can improve its financial position and profitability.