What are the three types of expenses that should be listed in an operating budget? (2023)

There are three major types of expenses we all pay: fixed, variable, and periodic. Do you know the difference?

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What are 3 types of expenses used by a company?

What are the three types of business expenses?

  • Fixed: These expenses tend not to change and remain the same. Examples include rent or equipment lease payments.
  • Variable: These expenses change from month to month. Examples include employee commissions and utilities.
  • Periodic: These expenses happen occasionally.

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What expenses are included in an operating budget?

The operating budgets include the budgets for sales, manufacturing costs (materials, labor, and overhead) or merchandise purchases, selling expenses, and general and administrative expenses.

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What are types of expenses?

Types of Expenses

  • Operating. Cost of Goods Sold (COGS) Marketing, advertising, and promotion. Salaries, benefits, and wages. Selling, general, and administrative (SG&A) Rent and insurance. Depreciation and amortization.
  • Non-operating. Interest. Taxes. Impairment charges.

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What are the 4 expense types?

Terms in this set (4)

  • Variable expenses. Expenses that vary from month to month (electriticy, gas, groceries, clothing).
  • Fixed expenses. Expenses that remain the same from month to month(rent, cable bill, car payment)
  • Intermittent expenses. ...
  • Discretionary (non-essential) expenses.

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(Video) Master Budget: Operating Expense Budget

Budgeting 101 - Understanding the three types of expenses

What are the 3 types of cost?

These expenses include:

  • Variable costs: This type of expense is one that varies depending on the company's needs and usage during the production process. ...
  • Fixed costs: Fixed costs are expenses that don't change despite the level of production. ...
  • Direct costs: These costs are directly related to manufacturing a product.

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What are 5 types of expenses?

The several types of expenses are:

  • Cost of Goods Sold.
  • Operating Expenses.
  • Financial Expenses.
  • Extraordinary Expenses.
  • Non-Operating Expenses.
  • Non-Cash Expenses.
  • Prepaid Expenses.
  • Accrued Expenses.

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What is an expense budget?

Definition: Expenditure Budget shows the revenue and capital disbursements of various ministries/departments and presents the estimates in respect of each under 'Plan' and 'Non-Plan'. Description: It gives a detailed analysis of various types of expenditure and broad reasons for the variations in estimates.

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What are the 4 elements of operational budget?

Basics Elements of a Good Budget

  • Income. The most basic element of all budgets is income. ...
  • Fixed expenses. Fixed expenses are those expenses over which you have little control or are unchangeable. ...
  • Flexible expenses. ...
  • Unplanned expenses and savings.

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What is operating expenses and non operating expenses?

Operating expenses are costs that a company must make to perform its operating activities — the primary activities that generate revenue. Non-operating expenses are costs that were not directly required for those activities.

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Which of the following expenses is not an operating expense?

Interest on debenture is not directly associated with the routine business activity, hence its a non operating expense.

(Video) Budgeting 101 - Understanding the three types of expenses

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What are expenses in accounting?

An expense in accounting is the money spent, or costs incurred, by a business in their effort to generate revenues. Essentially, accounts expenses represent the cost of doing business; they are the sum of all the activities that hopefully generate a profit.

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What are the 5 main components of an operating budget?

Although they can vary, some of the main components of an operating budget include the following sections:

  • Sales.
  • Production.
  • Direct materials.
  • Direct labor.
  • Overhead.
  • General and administrative expenses.

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What are the 5 basic elements of budgets?

Components of a budget

  • Estimated revenue. This is the money you expect your business to make from the sale of goods and services. ...
  • Fixed cost. When your business pays the same amount regularly for a particular expense, that is classified as a fixed cost. ...
  • Variable costs. ...
  • One-time expenses. ...
  • Cash flow. ...
  • Profit.

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What are the basic elements of a budget?

Know the Four Components of a Budget

  • Net Income. This is the income you take home from each paycheck. ...
  • Fixed Expenses. All expenses are not created equal. ...
  • Flexible Expenses. Like the name suggests, these expenses are flexible in how much they cost. ...
  • Discretionary Expenses. These are your wants. ...
  • Start Building Your Budget.

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What are the two types of expense?

There are two main categories of business expenses in accounting:

  • Operating expenses: Expenses related to the company's main activities, such as the cost of goods sold, administrative fees, and rent.
  • Non-operating expenses: Expenses not directly related to the business' core operations.

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(Video) CCCSMD Budgeting Part 1 - Three Major Types of Expenses

Which are the two categories in which expenses can be classified?

There are two types of expenses. There are (jargon alert) 'cost of sales' and 'overheads'. Cost of sales or sometimes called 'direct costs' are those costs in the business that directly impact the sales.

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What are three elements of cost?

The Elements of Cost are the three types of product costs (labor, materials and overhead) and period costs.

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What are the three key features of cost accounting?

Features of Cost Accounting

  • It is a sub-field in accounting. ...
  • Provides data to management for decision making and budgeting for the future.
  • It helps to establish certain standard costs and budgets.
  • provides costing data that helps in fixing prices of goods and services.

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What are the three common features of cost accounting and cost management?

Three common features of cost accounting and cost management are:

  • calculating the costs of products, services, and other cost objects.
  • obtaining information for planning and control and performance evaluation.
  • analyzing the relevant information for making decisions. Recommended textbook explanations.

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How do you prepare operating expenses for a budget?

How to Make an Operating Budget for Your Business

  1. Step 1: Make a sales budget.
  2. Step 2: Budget your costs.
  3. Step 3: Budget your operating expenses.
  4. Step 4: Account for unexpected expenses.
  5. Step 5: Adjust your budget.
  6. Step 6: Track your budget vs actuals.

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(Video) The Four Types of Expenses

Is capital expense budget an operating budget?

Operating expenses include things like insurance, payroll, and marketing. A capital expense (CapEx), on the other hand, is incurred to create a benefit in the future. They are long-term in nature and are generally used to acquire things like property, equipment, and technology.

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What does an operating budget look like?

The operating budget includes fixed costs, such as the monthly rent on office space or the monthly payment for a photocopier lease. The budget also includes operating expenses, such as interest on business loans, and the non-cash expense of depreciation.

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Which of the following is an example of expense?

Examples of Expenses

Common expenses are the cost of goods sold, rent expense, wages expense, and utilities expense.

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Which type of expenses are shown in balance sheet?


  • Current assets (cash, marketable securities, accounts receivable or debt owed to a company, inventory, and prepaid expenses)
  • Investments.
  • Fixed assets (property, plant, and equipment)
  • Intangible assets (patents, copyrights, goodwill)
  • Deferred charges or other assets.

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