Which is NOT a type of operating expense?

• A. Depreciation
• B. Property taxes
• C. Insurance
• D. Maintenance

Answer: (A)

Operating expenses are the cash costs required to run and maintain the property on a day-to-day basis. Depreciation isn’t a cash outflow; it’s an accounting allocation that spreads the cost of the building over its useful life. Because it doesn’t involve a current payment, depreciation isn’t considered an operating expense. In practice, items like property taxes, insurance, and maintenance are cash expenses you actually pay in the period, while depreciation reduces reported income but doesn’t affect cash flow in the period. For this reason, depreciation sits outside operating expenses and is treated separately on financial statements.