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Definition and Examples of

Operating Expenses

Explanation: Operating expenses are the costs associated with running a business on a day-to-day basis, like rent, utilities, and payroll.

Example: The monthly rent and utility bills for your freelance writing office are operating expenses.

Potential Issues: Incorrect recording or categorization of operating expenses can lead to misstated profit margins. Under-reporting expenses inflates profits artificially, while over-reporting can make the business appear less profitable than it actually is.

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