Is depreciation an operating expense?

[niyati]

I’m trying to understand the role of depreciation in financial statements. Is it classified as an operating expense, and how does it affect a company’s income statement?

 

[smith]

Yes, when the asset being depreciated is utilized in the company's primary business operations, depreciation is typically seen as an operating expense. Depreciation of equipment utilized in a manufacturing process, for instance, is usually categorized as an operational expense.

 

[maria]

Yes, depreciation is considered an operating expense on the income statement. It represents the gradual allocation of the cost of a fixed asset (like machinery, equipment, or buildings) over its useful life. Although it's a non-cash expense, it still reduces taxable income and reflects the asset's usage during operations.

 

[Emly]

Yes, depreciation is considered an operating expense. It represents the allocation of the cost of a fixed asset over its useful life and is recorded on the income statement as part of operating expenses. Depreciation helps businesses account for the wear and tear or usage of assets in generating revenue during normal operations.

 

[jenny]

Yes, depreciation is generally considered an operating expense. It reflects the gradual consumption of a fixed asset (like machinery or equipment) used in a company's day-to-day core business operations. While it's a non-cash expense, meaning no cash is exchanged when it's recorded, it's crucial for accurately matching the cost of assets to the revenue they help generate over their useful life.

 

[rajat]

Depreciation is considered an operating expense because it represents the systematic allocation of the cost of a tangible asset over its useful life, which is a normal part of business operations. Although it is a non-cash expense—meaning no actual cash is spent when it is recorded—it still affects the company’s income statement and reduces taxable income. As such, depreciation is typically included under operating expenses in financial reporting, reflecting the cost of using long-term assets to generate revenue.