810-440 · Question #1
Which type of expenditure is business insurance considered?
The correct answer is A. Operational. Business insurance is categorized as an operational expenditure because it represents an ongoing cost essential for the day-to-day running of a business.
Question
Which type of expenditure is business insurance considered?
Options
- AOperational
- BConsumption
- CCapital
- DShow back
How the community answered
(54 responses)- A91% (49)
- B2% (1)
- C2% (1)
- D6% (3)
Why each option
Business insurance is categorized as an operational expenditure because it represents an ongoing cost essential for the day-to-day running of a business.
Operational expenditures (OpEx) are recurring costs necessary for the daily operations of a business, such as rent, utilities, salaries, and insurance premiums. These expenses are consumed within the current accounting period and do not create long-term assets, but rather maintain the business's functionality and mitigate risks.
Consumption refers to the utilization of resources, not a type of financial expenditure itself.
Capital expenditures (CapEx) involve funds used to acquire or upgrade long-term physical assets, such as buildings or equipment, which provide benefit over multiple accounting periods.
Show back is a financial management practice for reporting IT costs back to business units, not a category of expenditure.
Concept tested: Operational vs. Capital Expenditures
Topics
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