What is included in operating expenses in the income statement?



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Hi sir! This question is from the lecture on income statement.
In income statement you mentioned taxes and interests separately.
Why these are not included in operating expenses even though these things comes under fixed costs.
Please Explain me?
Thank you!

1 Answer(s)


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Hi Ramu,

Operating Expenses are expenses that the company has to necessarily incur for the continuous operations of its business. For example the company has to have marketing expenses, salaries etc.

However Interest and Tax are not directly related to the operations of a company. In theory, a company could payback its loan and hence have no interest expense. Same with tax - a company could get tax benefits and hence not have tax expense and still operationally viable.

Hence operating expenses are the expenses that are directly relevant to the companys day to day operations - rent, salary, marketing expense, admin etc. A company has no alternative options to replace them.

Hope this is clear. Please let me know if you need more clarifications.

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