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</style><table class="sidebar sidebar-collapse nomobile nowraplinks accounting"><tbody><tr><td class="sidebar-pretitle">Part of a series on</td></tr><tr><th class="sidebar-title-with-pretitle"><a href="Accounting" title="Accounting">Accounting</a></th></tr><tr><td class="sidebar-image"><span class="notpageimage" typeof="mw:File"></span></td></tr><tr><td class="sidebar-above">
<div class="hlist"><ul><li><a href="Constant_purchasing_power_accounting" title="Constant purchasing power accounting">Constant purchasing power</a></li><li><a href="Historical_cost" title="Historical cost">Historical cost</a></li><li><a href="Management_accounting" title="Management accounting">Management</a></li><li><a href="Tax_accounting_in_the_United_States" title="Tax accounting in the United States">Tax</a></li></ul></div></td></tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed noborder"><div class="sidebar-list-title" style="color: var(--color-base)">Major types</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Audit" title="Audit">Audit</a></li><li><a href="Budget" title="Budget">Budget</a></li><li><a href="Cost_accounting" title="Cost accounting">Cost</a></li><li><a href="Forensic_accounting" title="Forensic accounting">Forensic</a></li><li><a href="Financial_accounting" title="Financial accounting">Financial</a></li><li><a href="Fund_accounting" title="Fund accounting">Fund</a></li><li><a href="Governmental_accounting" title="Governmental accounting">Governmental</a></li><li><a href="Management_accounting" title="Management accounting">Management</a></li><li><a href="Social_accounting" title="Social accounting">Social</a></li><li><a href="Tax_accounting" class="mw-redirect" title="Tax accounting">Tax</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Key concepts</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Accounting_period" title="Accounting period">Accounting period</a></li><li><a href="Accrual" title="Accrual">Accrual</a></li><li><a href="Constant_purchasing_power_accounting" title="Constant purchasing power accounting">Constant purchasing power</a></li><li><a href="Economic_entity" title="Economic entity">Economic entity</a></li><li><a href="Fair_value" title="Fair value">Fair value</a></li><li><a href="Going_concern" title="Going concern">Going concern</a></li><li><a href="Historical_cost" title="Historical cost">Historical cost</a></li><li><a href="Matching_principle" title="Matching principle">Matching principle</a></li><li><a href="Materiality_(auditing)" title="Materiality (auditing)">Materiality</a></li><li><a href="Revenue_recognition" title="Revenue recognition">Revenue recognition</a></li><li><a href="Unit_of_account" title="Unit of account">Unit of account</a></li></ul></div></div></div></td>
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<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Selected accounts</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Asset" title="Asset">Assets</a></li><li><a href="Cash" title="Cash">Cash</a></li><li><a href="Cost_of_goods_sold" title="Cost of goods sold">Cost of goods sold</a></li><li><a href="Depreciation" title="Depreciation">Depreciation</a> / <a href="Amortization_(business)" class="mw-redirect" title="Amortization (business)">Amortization (business)</a></li><li><a href="Equity_(finance)" title="Equity (finance)">Equity</a></li><li><a href="Expense" title="Expense">Expenses</a></li><li><a href="Goodwill_(accounting)" title="Goodwill (accounting)">Goodwill</a></li><li><a href="Liability_(financial_accounting)" title="Liability (financial accounting)">Liabilities</a></li><li><a href="Profit_(accounting)" title="Profit (accounting)">Profit</a></li><li><a href="Revenue" title="Revenue">Revenue</a></li></ul></div></div></div></td>
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<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="Accounting_standard" title="Accounting standard">Accounting standards</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Generally_accepted_accounting_principles" class="mw-redirect" title="Generally accepted accounting principles">Generally-accepted principles</a></li><li><a href="Generally_accepted_auditing_standards" class="mw-redirect" title="Generally accepted auditing standards">Generally-accepted auditing standards</a></li><li><a href="Convergence_of_accounting_standards" title="Convergence of accounting standards">Convergence</a></li><li><a href="International_Financial_Reporting_Standards" title="International Financial Reporting Standards">International Financial Reporting Standards</a></li><li><a href="International_Standards_on_Auditing" title="International Standards on Auditing">International Standards on Auditing</a></li><li><a href="Management_Accounting_Principles" class="mw-redirect" title="Management Accounting Principles">Management Accounting Principles</a></li></ul></div></div></div></td>
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<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="Financial_statement" title="Financial statement">Financial statements</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Annual_report" title="Annual report">Annual report</a></li><li><a href="Balance_sheet" title="Balance sheet">Balance sheet</a></li><li><a href="Cash_flow_statement" title="Cash flow statement">Cash-flow</a></li><li><a href="Statement_of_changes_in_equity" title="Statement of changes in equity">Equity</a></li><li><a href="Income_statement" title="Income statement">Income</a></li><li><a href="Management_discussion_and_analysis" class="mw-redirect" title="Management discussion and analysis">Management discussion</a></li><li><a href="Financial_statement_analysis" title="Financial statement analysis">Financial statement analysis</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="Bookkeeping" title="Bookkeeping">Bookkeeping</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Bank_reconciliation" title="Bank reconciliation">Bank reconciliation</a></li><li><a href="Debits_and_credits" title="Debits and credits">Debits and credits</a></li><li><a href="Double-entry_bookkeeping_system" class="mw-redirect" title="Double-entry bookkeeping system">Double-entry system</a></li><li><a href="FIFO_and_LIFO_accounting" title="FIFO and LIFO accounting">FIFO and LIFO</a></li><li><a href="General_journal" title="General journal">Journal</a></li><li><a href="Ledger" title="Ledger">Ledger</a> / <a href="General_ledger" title="General ledger">General ledger</a></li><li><a href="Trial_balance" title="Trial balance">Trial balance</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)"><a href="Audit" title="Audit">Auditing</a></div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Financial_audit" title="Financial audit">Financial</a></li><li><a href="Internal_audit" title="Internal audit">Internal</a></li><li><a href="Accounting_networks_and_associations" class="mw-redirect" title="Accounting networks and associations">Firms</a></li><li><a href="Auditor's_report" title="Auditor's report">Report</a></li><li><a href="Sarbanes%E2%80%93Oxley_Act" title="Sarbanes–Oxley Act">Sarbanes–Oxley Act</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">People and organizations</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Accountant" title="Accountant">Accountants</a></li><li>Accounting organizations</li><li><a href="Luca_Pacioli" title="Luca Pacioli">Luca Pacioli</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Development</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="History_of_accounting" title="History of accounting">History</a></li><li><a href="Accounting_research" title="Accounting research">Research</a></li><li><a href="Positive_accounting" title="Positive accounting">Positive accounting</a></li><li><a href="Sarbanes%E2%80%93Oxley_Act" title="Sarbanes–Oxley Act">Sarbanes–Oxley Act</a></li></ul></div></div></div></td>
</tr><tr><td class="sidebar-content">
<div class="sidebar-list mw-collapsible mw-collapsed"><div class="sidebar-list-title" style="color: var(--color-base)">Misconduct</div><div class="sidebar-list-content mw-collapsible-content"><div class="hlist"><ul><li><a href="Creative_accounting" title="Creative accounting">Creative</a></li><li><a href="Earnings_management" title="Earnings management">Earnings management</a></li><li><a href="Error_account" title="Error account">Error account</a></li><li><a href="Hollywood_accounting" title="Hollywood accounting">Hollywood</a></li><li><a href="Off-balance-sheet" title="Off-balance-sheet">Off-balance-sheet</a></li><li><a href="Two_sets_of_books" title="Two sets of books">Two sets of books</a></li></ul></div></div></div></td>
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<p>An <b>operating expense</b> (<b>opex</b>)<sup id="cite_ref-1" class="reference"><a href="#cite_note-1"><span class="cite-bracket">[</span>a<span class="cite-bracket">]</span></a></sup> is an ongoing cost for running a product, business, or system.<sup id="cite_ref-2" class="reference"><a href="#cite_note-2"><span class="cite-bracket">[</span>1<span class="cite-bracket">]</span></a></sup> Its counterpart, a <i><a href="Capital_expenditure" title="Capital expenditure">capital expenditure</a></i> (capex), is the cost of developing or providing non-consumable parts for the product or system. For example, the purchase of a <a href="Photocopier" title="Photocopier">photocopier</a> involves capex, and the annual paper, <a href="Toner_(printing)" title="Toner (printing)">toner</a>, power and maintenance costs represents opex.<sup id="cite_ref-3" class="reference"><a href="#cite_note-3"><span class="cite-bracket">[</span>2<span class="cite-bracket">]</span></a></sup> For larger systems like businesses, opex may also include the cost of workers and facility expenses such as rent and utilities.<sup id="cite_ref-4" class="reference"><a href="#cite_note-4"><span class="cite-bracket">[</span>3<span class="cite-bracket">]</span></a></sup>
</p>
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<div class="mw-heading mw-heading2"><h2 id="Overview">Overview</h2></div>
<p>In <a href="Business" title="Business">business</a>, an operating expense is a day-to-day <a href="Expense" title="Expense">expense</a> such as <a href="Sales" title="Sales">sales</a> and <a href="Business_administration" title="Business administration">administration</a>, or <a href="Research_%26_development" class="mw-redirect" title="Research & development">research & development</a>, as opposed to <a href="Production_(economics)" title="Production (economics)">production</a>. In short, this is the <a href="Money" title="Money">money</a> the business spends in order to turn <a href="Inventory" title="Inventory">inventory</a> into <a href="Throughput_(business)" title="Throughput (business)">throughput</a>.
</p><p>On an <a href="Income_statement" title="Income statement">income statement</a>, "operating expenses" is the sum of a business's operating expenses for a period of time, such as a month or year.
</p><p>In <a href="Throughput_accounting" title="Throughput accounting">throughput accounting</a>, the <a href="Cost_accounting" title="Cost accounting">cost accounting</a> aspect of the <a href="Theory_of_constraints" title="Theory of constraints">theory of constraints</a> (TOC), operating expense is the <a href="Money" title="Money">money</a> spent turning <a href="Inventory" title="Inventory">inventory</a> into <a href="Throughput" class="mw-redirect" title="Throughput">throughput</a>.<sup id="cite_ref-5" class="reference"><a href="#cite_note-5"><span class="cite-bracket">[</span>4<span class="cite-bracket">]</span></a></sup> In TOC, operating expense is limited to costs that vary strictly with the quantity produced, like raw materials and purchased components. Everything else is a <a href="Fixed_cost" title="Fixed cost">fixed cost</a>, including labour (unless there is a regular and significant chance that workers will not work a full-time week when they report on their first day).
</p><p>In a <a href="Real_estate" title="Real estate">real estate</a> context, operating expenses include costs associated with the operation and maintenance of an income-producing property.
</p><p>Operating expenses include:
</p>
<ul><li>salary and wages</li>
<li>accounting expenses</li>
<li><a href="License" title="License">license</a> fees</li>
<li>maintenance and repairs, such as snow removal, trash removal, janitorial service, pest control, and lawn care</li>
<li>advertising</li>
<li>office expenses</li>
<li>supplies</li>
<li>attorney fees and legal fees</li>
<li>utilities, such as telephone</li>
<li>insurance</li>
<li>property management, including a resident manager</li>
<li>property taxes</li>
<li>travel and vehicle expenses</li></ul>
<dl><dd><b>Travel expenses</b> are defined as those incurred in the event of travel required for professional purposes.
<dl><dd>For this purpose, “travel” is defined as the simultaneous absence from the <a href="House" title="House">residence</a> and from the regular place of <a href="Employment" title="Employment">employment</a>. It is prompted by professional or company purposes and likely does not concern the traveler’s private life, or concerns it only to a small degree. Travel expenses include travel costs and fares, accommodation expenses, and so-called additional expenses for <a href="Meal" title="Meal">meals</a>.</dd></dl></dd></dl>
<ul><li>leasing commissions</li></ul>
<div class="mw-heading mw-heading2"><h2 id="See_also">See also</h2></div>
<ul><li><a href="Capital_expenditure" title="Capital expenditure">Capital expenditure</a> (capex)</li>
<li><a href="Total_cost_of_ownership" title="Total cost of ownership">Total cost of ownership</a> (TCO)</li>
<li><a href="Capital_budgeting" title="Capital budgeting">Capital budgeting</a></li>
<li><a href="Freight_expense" title="Freight expense">Freight expense</a></li>
<li><a href="Operating_cost" title="Operating cost">Operating cost</a></li>
<li><a href="Overhead_(business)" title="Overhead (business)">Overhead (business)</a></li>
<li><a href="Working_capital" title="Working capital">Working capital</a></li></ul>
<div class="mw-heading mw-heading2"><h2 id="Notes">Notes</h2></div>
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<li id="cite_note-1"><span class="mw-cite-backlink"><b><a href="#cite_ref-1">^</a></b></span> <span class="reference-text">Also known as <b>operating expenditure</b>, <b>operational expense</b>, or <b>operational expenditure</b>.</span>
</li>
</ol></div></div>
<div class="mw-heading mw-heading2"><h2 id="References">References</h2></div>
<div class="reflist">
<div class="mw-references-wrap"><ol class="references">
<li id="cite_note-2"><span class="mw-cite-backlink"><b><a href="#cite_ref-2">^</a></b></span> <span class="reference-text">David Maguire, The business benefits of GIS : an ROI approach, 1st ed. (Redlands Calif.: ESRI Press, 2008), <a rel="nofollow" class="external free" href="http://roi.esri.com/">http://roi.esri.com/</a> <a rel="nofollow" class="external text" href="https://web.archive.org/web/20190110182133/http://roi.esri.com/">Archived</a> 2019-01-10 at the <a href="Wayback_Machine" title="Wayback Machine">Wayback Machine</a>. <style data-mw-deduplicate="TemplateStyles:r1238218222">
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</style><a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-1-58948-200-5</bdi></span>
</li>
<li id="cite_note-3"><span class="mw-cite-backlink"><b><a href="#cite_ref-3">^</a></b></span> <span class="reference-text"><cite id="CITEREFAswath_Damodaran1999" class="citation book cs1">Aswath Damodaran (1999). <a rel="nofollow" class="external text" href="http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AppldCF/derivn/ch5deriv.html">"Chapter 5 - Discussion Issues and Derivations"</a>. <a rel="nofollow" class="external text" href="https://pages.stern.nyu.edu/~adamodar/New_Home_Page/AppldCF/appldCF.htm"><i>Applied Corporate Finance: A User’s Manual</i></a>. John Wiley and Sons. <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-0-471-33042-4</bdi>. <q>Accountants draw a distinction between expenditures that yield benefits only in the immediate period or periods (such as labor and material for a manufacturing firm) and those that yield benefits over multiple periods (such as land, buildings and long-lived plant). The former are called operating expenses and are subtracted from revenues in computing the accounting income, while the latter are capital expenditures and are not subtracted from revenues in the period that they are made. Instead, the expenditure is spread over multiple periods and deducted as an expense in each period - these expenses are called depreciation (if the asset is a tangible asset like a building) or amortization (if the asset is an intangible asset like a patent or a trade mark).</q></cite></span>
</li>
<li id="cite_note-4"><span class="mw-cite-backlink"><b><a href="#cite_ref-4">^</a></b></span> <span class="reference-text"><cite id="CITEREFCom" class="citation news cs1">Com, Netsuite. <a rel="nofollow" class="external text" href="https://www.netsuite.com/portal/resource/articles/financial-management/expense-expenditure.shtml">"Expense vs. Expenditure: What's the Difference?"</a>. <i>Oracle Netsuite</i>.</cite></span>
</li>
<li id="cite_note-5"><span class="mw-cite-backlink"><b><a href="#cite_ref-5">^</a></b></span> <span class="reference-text">Goldratt, E. M., & Cox, J. "The Goal: A Process of Ongoing Improvement" (Rev. ed.). (1986)., p. 61.</span>
</li>
</ol></div></div>
<div class="mw-heading mw-heading2"><h2 id="Further_reading">Further reading</h2></div>
<ul><li>Harry I. Wolk, James L. Dodd, Michael G. Tearney. <i>Accounting Theory: Conceptual Issues in a Political and Economic Environment</i> (2004). <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>0-324-18623-1</bdi>.</li>
<li>Angelico A. Groppelli, Ehsan Nikbakht. <i>Finance</i> (2000). <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>0-7641-1275-9</bdi>.</li>
<li>Barry J. Epstein, Eva K. Jermakowicz. <i>Interpretation and Application of International Financial Reporting Standards</i> (2007). <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-0-471-79823-1</bdi>.</li>
<li>Jan R. Williams, Susan F. Haka, Mark S. Bettner, Joseph V. Carcello. <i>Financial & Managerial Accounting</i> (2008). <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-0-07-299650-0</bdi>.1</li>
<li>Goldratt, E. M., & Cox, J. (1986). The Goal: A Process of Ongoing Improvement (Rev. ed.). <a href="ISBN_(identifier)" class="mw-redirect" title="ISBN (identifier)">ISBN</a> <bdi>978-0-88427-178-9</bdi>.</li></ul>
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<li><a href="Management_accounting" title="Management accounting">Management accounting</a></li>
<li><a href="Forensic_accounting" title="Forensic accounting">Forensic accounting</a></li>
<li><a href="Fund_accounting" title="Fund accounting">Fund accounting</a></li>
<li><a href="Governmental_accounting" title="Governmental accounting">Governmental accounting</a></li>
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<ul><li><a href="Income_statement" title="Income statement">Income statement</a></li>
<li><a href="Balance_sheet" title="Balance sheet">Balance sheet</a></li>
<li><a href="Statement_of_changes_in_equity" title="Statement of changes in equity">Statement of changes in equity</a></li>
<li><a href="Cash_flow_statement" title="Cash flow statement">Cash flow statement</a></li></ul>
</div></td></tr><tr><th scope="row" class="navbox-group" style="width:1%">Terms</th><td class="navbox-list-with-group navbox-list navbox-odd" style="width:100%;padding:0"><div style="padding:0 0.25em">
<ul><li><a href="Debits_and_credits" title="Debits and credits">Debits and credits</a></li>
<li><a href="Revenue" title="Revenue">Revenue</a></li>
<li><a href="Cost_of_goods_sold" title="Cost of goods sold">Cost of goods sold</a></li>
<li><a href="Capital_expenditure" title="Capital expenditure">Capital expenditure</a></li>
<li><a href="Depreciation" title="Depreciation">Depreciation</a></li>
<li><a href="Gross_income" title="Gross income">Gross income</a></li>
<li><a href="Net_income" title="Net income">Net income</a></li></ul>
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