Operating costs are those incurred by a company for the fact of carrying out its main productive activity. These are recorded in the accounts.
Within accounting, operating costs are related to the development of its economic activity.
The costs or costs of an operational nature, therefore, will be those necessary to carry out the daily production of an organization.
The ledgers reflect these costs in order to show an accurate measure of the actual profitability of a project.
That is, to give a true image of what the organization, from an economic point of view, means to carry out a certain business activity.
Practical application of operating costs
The inflows and outflows of money that a company registers when undertaking its operating expenses will make up the total operating cost.
Thus, other costs would not be included, such as those called "non-operational", as well as those incurred for the development of another activity that is not the main one of the company.
An example of this is the accounting record of other activities carried out, such as the application of policies related to CSR, or cultural sponsorship.
From the accounting point of view, we would have that the operating expenses would be the sum of the accounting entries directed to sales expenses, company administration or financial expenses.
Main characteristics of operating costs
Compared to other cost or expense modalities common in day-to-day accounting, the operations have the following characteristic features:
- Productive activity : To carry out its main activity, each company incurs expenses derived from the use of raw materials and purchases of various merchandise.
- Infrastructure : The rush to carry out an activity involves costs in the purchase or rental of real estate, machinery or tools.
- Energy benefits: Expenses such as the one involved in contracting electricity, water or the internet connection that allows us to read this article are included in this typology, as long as they are necessary for the development of the main productive task.
- Labor nature : Those costs related to the hiring of personnel and their periodic remuneration are operational. The most prominent are labor taxes, professional training expenses or salaries.
- Periodicity : As with other types of cost, these can be recorded continuously as fixed or, also, as variable.
- Durability : These routine expenses only occur as long as the activity we are developing lasts. When a business ends, these expenses do with it.
From an accounting point of view, operating costs are formally included in an operating budget.
This document makes it easier for organizations to forecast, in economic terms, the resources to be allocated when carrying out their main work.
Companies of all sizes are susceptible to costs of this nature. Although it is true that in a digital context, more and more companies carry out their activity with a low volume of them.
Operating costs as an accounting representation of operating costs
Colloquially, this concept is also known as operational expenses.
On the other hand, it is important to point out that operating expenses make up, together with transportation costs, the so-called logistics costs.
All operating costs must appear in their respective accounts, reflected in the General Accounting Plan. In practice, at the end of each period, these expenses must be written off by means of charges to profit and loss.