Definition of Operating Expenses

In an activity business there are a whole series of expenses. From an accounting point of view, operating expenses are all those disbursements that are related to the activity of the company. administration of a company and the sale of its products or services.

Types of operating expenses and their accounting profit

Operating expenses are divided into selling expenses and administrative expenses. In the first case, we refer to all those actions aimed at selling the products of a company and are made up of expenses such as advertising, salaries, vendor commissions or transportation. As for administrative expenses, they are made up of the depreciation of office equipment, rental payments, water, electricity, telephone or office supplies.

Regarding the utility of operating expenses, two aspects must be highlighted

1) allow to know the accounting reality of a company and

2) allow you to prepare a budget for the next year or accounting cycle.

Operating expenses within a company's budget

When a budget is made, a series of aspects or accounting items must be differentiated: sales, production, the workforce, the costs of the raw material and operating expenses.

First of all, it should be noted that operating expenses should not be confused with other types of common expenses, for example with production costs.

The budget for operating expenses is an estimate and is based on information from the previous year.

As for fixed selling expenses, those that remain constantly are budgeted. On the other hand, there are sales expenses that are variable, since they logically depend on the volume of sales (for example, the materials to package the products or the commissions of the sellers).

Types of expenses and income in business activity

A company, whether commercial, service or industrial, has a series of expenses and income. As for the first, we have the administration and sales expenses that make up the set of operating expenses, but other expenses must also be considered, such as indirect of manufacturing, those related to the purchase or financial expenses. In the income section, those of a financial nature stand out, income from investments or for dividends or purchase discounts.

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