Operating expense definition
/What is Operating Expense?
Operating expense is any expense associated with the general, sales, and administrative functions of an entity. This expense is not associated with production activities. The management team usually reviews these expenses through a budget variance reporting system or trend line analysis in order to spot any expense spikes that may require action.
Examples of Operating Expenses
Examples of operating expenses are administrative salaries, rent, utilities, travel and entertainment, and office supplies. All of these expenses are needed to ensure the proper functioning of a business.
Operating Expenses vs. Non-Operating Expenses
Operating expenses are needed to ensure that the core operations of a business function as intended. This differs from non-operating expenses, which are incurred in relation to anything outside of a firm’s core activities. Examples of non-operating expenses are gains or losses on asset sales, restructuring expenses, and lawsuit settlements.