Define operating expenses, Accounting Basics

Assignment Help:

Q. Define Operating expenses?

Operating expenses for a merchandising company are those expenses other than cost of goods sold incurred in the usual business functions of a company. Typically operating expenses are either selling expenses or else administrative expenses. Selling expenses are expenses a company acquire in selling and marketing efforts. Instance include salaries and commissions of salespersons expenses for salespersons' travel delivery advertising rent (or depreciation if owned) as well as utilities on a sales building sales supplies used as well as depreciation on delivery trucks used in sales. Administrative expenses are expenses a company acquires in the overall management of a business. Examples comprise administrative salaries rent or depreciation if owned as well as utilities on an administrative building insurance expense and administrative supplies used and depreciation on office equipment.

Certain operating expenses perhaps shared by the selling and administrative functions. For instance a company might incur rent or taxes and insurance on a building for both sales and administrative purposes. Expenses covering both the selling as well as administrative functions should be analyzed and prorated between the two functions on the income statement. For instance if USD 1000 of depreciation expense relates 60 percent to selling as well as 40 percent to administrative based on the square footage or number of employees the income statement would show USD 600 as a selling expense and USD 400 as an administrative expense.


Related Discussions:- Define operating expenses

How is a journal entry recorded?, Journal Entries are recorded on a double ...

Journal Entries are recorded on a double entry system like debit and credit concept. In order to record a journal entry the following steps require to be followed. ? Enter the J

Share-based payment transactions, Q. Share-based payment transactions? ...

Q. Share-based payment transactions? The fair value accounting standard SFAS 157 applies to monetary assets of all publicly-traded companies in the US as of 2007 Nov. 15. It as

Measurement of expense, The measurement of expense Accountants measure larg...

The measurement of expense Accountants measure largely assets used in operating a business by their historical costs. Consequently they measure a depreciation expense resulting fro

Classify the following items as, Classify the following items as (a) defer...

Classify the following items as (a) deferred expense (prepaid expense), (b) deferred revenue (unearned revenue), (c) accrued expense (accrued liability), or (d) accrued reven

What do you mean by salaries, Q. What do you mean by Salaries? The reco...

Q. What do you mean by Salaries? The recording of the payment of employee salaries typically involves a debit to an expense account and a credit to Cash. But for a company pays

Show journalizing adjusting entries, Q. Show Journalizing adjusting entries...

Q. Show Journalizing adjusting entries? Subsequent to completing Micro Train's financial statements from the work sheet you should enter the adjusting entries in the general jo

Direct materials, You have been assigned to analyze the costs of NC Microel...

You have been assigned to analyze the costs of NC Microelectronics, a microchip manufacturer. Indicate whether the following costs are more likely fixed (F), variable (V), or mixed

Show tax benefits of lifo, Q. Show Tax benefits of LIFO? Tax benefits o...

Q. Show Tax benefits of LIFO? Tax benefits of LIFO The LIFO method outcomes in the lowest taxable income and thus the lowest income taxes when prices are rising. The Internal R

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd