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Expenses
Expenses are fees and costs incurred by the business for the goods and services used to generate revenues.
Cost of Goods Sold
Cost of goods sold (Cost of sales) represents all the expenses directly incurred in order to bring a product or service to market.
Examples:
- Cost of purchasing the inventory from suppliers
- Cost of materials, labour and overhead used to produce a product
Operating Expenses
Operating expenses are the indirect costs incurred by a business to bring its products and services to market.
Examples:
- Salaries and wages expense
- Supplies expense
- Rent expense
- Depreciation expense
- Marketing expense
Non-Operating Expenses
Non-operating expenses are the costs incurred that are not related to normal business operations. Also called Other expenses.
Examples:
- Interest expense
- Income tax expense
- Losses from disposition of assets
- Losses from settlements of liabilities
Practice: Expenses
ABC Inc. is a shoe manufacturer based in Calgary, Alberta. The company's income statement included several expense accounts, please select all the accounts that should be reported as operating expenses.
Practice: Expenses
The Sports Rack is a sporting goods retailer in Newport, California. The following income statement was reported in 2019, and you suspect that errors were made specifically in the classification of the expense accounts.
