Operating expenses are the necessary costs associated with running a business and include things such as employee salaries, buildings and utilities, tools, materials and equipment and marketing costs. Operating expenses are represented on a company's balance sheet under the category of liabilities. These expenses directly contribute to the production of the goods or services a business provides. They are also known as selling, general and administrative (SG&A) expenses. Operating expenses, commonly abbreviated as OPEX, are the ongoing expenses a business accrues through its normal operations. There are three common types of operating expenses: compensation-related, office or workplace-related and sales and marketing-related operating expenses. Operating expenses are not the same as capital expenses. Operating expenses are represented on a company's balance sheet as a subcategory under the category of liabilities. Operating expenses include employee salaries, buildings and utilities, tools, materials and equipment, and marketing costs. In this article, we discuss what operating expenses are and what they mean to a balance sheet, how they differ from liabilities and capital expenses and how to categorize operating expenses with examples.Īn operating expense is an ongoing expense a business incurs during its normal operations. Knowing what operating expenses are and how to manage them properly is important to both business owners and anyone seeking a career in management or operations. Effectively managing operating expenses is an important part of running a successful business and keeping a company's balance sheet organized.
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