Which category includes ongoing costs of running the business, such as salaries and marketing?

Which category includes ongoing costs of running the business, such as salaries and marketing?

• A. Cost of Goods Sold (COGS)
• B. Operating Expenses
• C. Depreciation
• D. Balance Sheet

Answer: (B)

Ongoing costs of running the business are captured by operating expenses. These are the day-to-day overhead costs that aren’t tied directly to producing a specific product, such as salaries, marketing, rent, utilities, and office supplies. They’re recognized as expenses in the period they’re incurred and appear on the income statement, reducing operating income. Costs of goods sold, by contrast, are the direct costs of producing or purchasing the goods that are sold (materials, direct labor tied to production). Depreciation represents allocating the cost of fixed assets over their useful life and is a non-cash expense that appears within the financial statements as an expense over time. The balance sheet is a snapshot of assets, liabilities, and equity, not an expense category.

Ongoing costs of running the business are captured by operating expenses. These are the day-to-day overhead costs that aren’t tied directly to producing a specific product, such as salaries, marketing, rent, utilities, and office supplies. They’re recognized as expenses in the period they’re incurred and appear on the income statement, reducing operating income.

Costs of goods sold, by contrast, are the direct costs of producing or purchasing the goods that are sold (materials, direct labor tied to production). Depreciation represents allocating the cost of fixed assets over their useful life and is a non-cash expense that appears within the financial statements as an expense over time. The balance sheet is a snapshot of assets, liabilities, and equity, not an expense category.