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Simple English definitions for legal terms
operating expense
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A quick definition of operating expense:
An operating expense is money that a business spends to keep running and produce its products or services. This includes things like rent, salaries, and supplies. Operating expenses are different from costs that are used to create long-term benefits, like buying a building or equipment. Some operating expenses can be deducted from a business's taxes, which means they can lower the amount of taxes the business has to pay.
A more thorough explanation:
An operating expense is a cost incurred by a business to run its operations and produce output. It is a type of expense that is charged against revenue for a specific period. Examples of operating expenses include rent, utilities, salaries, and supplies.
For instance, if a company spends $10,000 on rent for its office space in a month, it is an operating expense. Similarly, if a business spends $5,000 on salaries for its employees in a month, it is also an operating expense.
Operating expenses are different from capital expenses, which are costs incurred by a business to provide long-term benefits. Capital expenses are not deductible, but they can be used for depreciation or amortization.
Overall, operating expenses are essential for a business to keep running and producing its goods or services.