List of Operating Expenses

Other costs excluded from the operating cost include auditor fees, debt replacement costs, bank fees, etc.

Every company tries to reduce the burden of operating expenses as much as possible. It is one of the deciding factors of the firm’s ability to compete with its competitors.

The Operating Expenses list is divided into two parts – Selling, General and Admin Expense (SG&A), and Costs of Goods Sold.

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List of Operating Expense under SG&A Expenses

These costs are part of operating expenses because they incur due to the main business activities. These expenses include telephone expenses, transportation expenses, utility expenseUtility ExpenseUtilities Expenses are the prices incurred by a Company for the usage of utilities like sewage, electricity, waste disposal, water, broadband, heating, & telephone. These are included as operating expenses in the Company’s income sheet. read more, sales expenses, Rent, repair & maintenance, bank charges, legal expenses, office supplies, insurance, salaries and wages of administrative staff, Research expenses, etc.

Below is the list of 13 Operating expenses that come under Selling, General, and Admin costs.

#1- Telephone Expenses

These are the costs incurred on a landline or mobile phone. Generally, monthly bills are payable to them. Many Companies also reimburse their employees for their telephone expenses. Depending upon the company policy, telephone expenses are charged to the Profit and loss account.

#2 – Travelling Expenses

These are the expenses paid by the company for their staff during their official visit. The staff can travel to meet customers, for some supplies, or any other event. In such a case, either company pays them expenses directly or reimburses them after their visit. These expenses are charged in the P&L as traveling expenses.

#3 – Office Equipment and Supplies

These are the expenses incurred to purchase office supplies for use on a day-to-day basis in the office. For example, pens, paper, clippers, etc.

#4 – Utility Expenses

The expenses related to payment of utility bills of the company, like expenses of water and electricity generally used for the daily operating activitiesOperating ActivitiesOperating activities generate the majority of the company’s cash flows since they are directly linked to the company’s core business activities such as sales, distribution, and production.read more are utility expenses. They are charged to the profit and loss account of the company.

#5 – Property Tax

The property tax paid by the company on its properties forms part of the operating expenses.

#6 – Legal Expenses

These incur for using the legal services by the company. These charges to the Profit and Loss Account of the company under the head legal expenses.

#7 – Bank Charges

The fees charged by the banks for the general transactions going in the businessTransactions Going In The BusinessA business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company’s financial statements.read more are known as the bank charges. For example, transaction charges for cheque fees, etc.

#8 – Repair and Maintenance Expenses

The Repair and maintenance operating expense on the asset used for a production like repairing requirements of machines or the vehicles in the company.

#19 – Insurance Expenses

Such expenses incurred for taking insurance of health care, general insurance of staff, and fire insuranceFire InsuranceFire insurance protects an individual or a business against property loss or damage caused by an unintentional fire. It may, however, require the policyholder to meet specific fire safety standards to become eligible for the coverage. The coverage limit typically depends on the fire origin, the type of asset, and the insurance provider.read more. The company charges these to the profit and loss account under the head insurance expensesInsurance ExpensesInsurance Expense, also called Insurance Premium, is the amount a Company pays to obtain an insurance contract for covering their risk from any unexpected catastrophe. You can calculate it as a fixed percentage of the sum insured & it is paid at a daily pre-specified period. read more.

#10 – Advertising Expenses

This operating expense related to the promotion and advertising forms part of the company’s operating expenses as they are done to increase sales. The same, however, does not include the trade discount the company gives its customers.

#11 – Research Expenses

These operating expenses, incurred for research of the new products, are treated as revenue expenses and should not be capitalized. These are charged to the Profit and Loss accountProfit And Loss AccountThe Profit & Loss account, also known as the Income statement, is a financial statement that summarizes an organization’s revenue and costs incurred during the financial period and is indicative of the company’s financial performance by showing whether the company made a profit or incurred losses during that period.read more

#12 – Entertainment Expenses

The entertainment expenses incurred for the sales and related support activities form part of the company’s operating expenses.

#13 – Sales Expenses

These operating expenses incurred to increase sales are part of the sales expenses. For example, a discount on sales, the sales commissionSales CommissionSales commission is a monetary reward awarded by companies to the sales reps who have managed to achieve their sales target. It is an incentive geared towards producing more sales and rewarding the performers while simultaneously recognizing their efforts. A sales commission agreement is signed to agree on the terms and conditions set for eligibility to earn a commission.read more expenses, etc.

List of Operating Expense under COGS

Cost of the Goods SoldCost Of The Goods SoldThe Cost of Goods Sold (COGS) is the cumulative total of direct costs incurred for the goods or services sold, including direct expenses like raw material, direct labour cost and other direct costs. However, it excludes all the indirect expenses incurred by the company. read more is the Costs that are incurred for the Goods or products sold by the organization during a specific period. The cost, considered while calculating the cost of goods sold, refers to the cost directly attributable to goods or products sold by the company. It includes direct labor, direct overheads, and direct materialDirect MaterialDirect materials are raw materials that are directly used in the manufacturing process of a company’s goods and/or services and are an essential component of the finished goods manufactured.read more. The cost should be matched with corresponding revenues, which the entity has recognized in the income statementIncome StatementThe income statement is one of the company’s financial reports that summarizes all of the company’s revenues and expenses over time in order to determine the company’s profit or loss and measure its business activity over time based on user requirements.read more.

Below is the list of 6 Operating expenses that come under the Cost of Goods Sold.

#1 – Freight in Cost

is the Costs that are incurred for the Goods or products sold by the organization during a specific period. The cost, considered while calculating the cost of goods sold, refers to the cost directly attributable to goods or products sold by the company. It includes direct labor, direct overheads, and

#2 – Freight out Cost

Freight out is the cost of transportation. It is associated with the delivery of the goods from the place of the supplier to customers. And the same should be included within the cost of the goods sold classification in the income statement.

#3 – Product Cost

These are the costs that are incurred to make the product in the condition to sell it to customers. The product cost includes costs related to direct labor, direct overheads, and direct material

#4 – Rental Cost

Rental Cost is paid for the properties used for providing the support related to the production. The Salaries, wages, and other benefits are given to the staff related to the production of goods.

#5 – Depreciation Expenses

The reduction in the asset value due to wear and tear while using at the time of production is the depreciation expense. It forms part of the cost of goods sold.

#6 – Others Costs

These are incurred, which is directly attributable to production form part of the cost of goods sold.

This article has been a guide to the list of Operating Expenses. Here we discuss the items included in Operating Costs (including SG&A and COGS) along with practical examples. You may learn more about accounting from the following articles-

  • Operating Expense ExamplesCOGMFormula of Operating Expense RatioOperating Earnings Definition