Technical definition
An expense arising from ordinary business operations, excluding classifications such as finance cost and income tax where separately presented.
How it works
Operating expenses commonly include personnel, rent, marketing, administration and depreciation used in operations. Their exact presentation depends on whether expenses are classified by nature or function.
Everyday example
Monthly salaries of $18,000 and office rent of $4,000 are operating expenses of the period.
Common pitfall
Operating expense is not the same as cash paid: accruals, prepayments and non-cash depreciation create timing differences.