Course Outline
Join PRO

Is depreciation an operating expense?

Author:
Harold Averkamp, CPA, MBA

Depreciation Could Be Either an Operating Expense or a Non-operating Expense

Depreciation is an operating expense if the asset being depreciated is used in an organization’s main operating activities.

Depreciation is a non-operating expense if the asset being depreciated is used in a peripheral or incidental activity of an organization.

Examples of When Depreciation is an Operating Expense

Examples of depreciation being reported as part of the operating expenses on the income statement include:

  • Depreciation of a retailer’s store displays, warehouse equipment, delivery truck, and buildings used in its selling and general administrative functions. The depreciation will be reported on the retailer’s income statement in the section containing its SG&A expenses.
  • Depreciation of the equipment and building used in the manufacturer’s selling and general administrative functions. This depreciation will be reported on the manufacturer’s income statement in the section containing its SG&A expenses.
  • Depreciation of equipment and building used in the manufacturing of products. This depreciation will be allocated to the goods produced and is considered part of a product’s indirect costs. In the period in which a product is sold, its cost (including its share of depreciation) will be reported as part of the cost of goods sold, which is likely to be the largest operating expense on a manufacturer’s income statement.
Join PRO to Track Progress
Must-Watch Video

Advance Your Accounting and Bookkeeping Career

  • Perform better at your job
  • Get hired for a new position
  • Understand your small business
  • Pass your accounting class
Watch the Video

Join PRO or PRO Plus and Get Lifetime Access to Our Premium Materials

Read all 2,645 reviews

Features

PRO

PRO Plus

Features
Lifetime Access (One-Time Fee)
Explanations
Quizzes
Q&A
Word Scrambles
Crosswords
Bookkeeping Video Training
Financial Statements Video Training
Flashcards
Visual Tutorials
Quick Tests
Quick Tests with Coaching
Cheat Sheets
Business Forms
All PDF Files
Progress Tracking
Earn Badges and Points
Certificate - Debits and Credits
Certificate - Adjusting Entries
Certificate - Financial Statements
Certificate - Balance Sheet
Certificate - Income Statement
Certificate - Cash Flow Statement
Certificate - Working Capital
Certificate - Financial Ratios
Certificate - Bank Reconciliation
Certificate - Payroll Accounting

About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

Certificates of
Achievement

Certificates of Achievement

We now offer 10 Certificates of Achievement for Introductory Accounting and Bookkeeping:

  • Debits and Credits
  • Adjusting Entries
  • Financial Statements
  • Balance Sheet
  • Income Statement
  • Cash Flow Statement
  • Working Capital and Liquidity
  • Financial Ratios
  • Bank Reconciliation
  • Payroll Accounting
Badges and Points
  • Work towards and earn 30 badges
  • Earn points as you work towards completing our course
View PRO Plus Features
Course Outline
Take the Tour Join Pro Upgrade to Pro Plus