Updated last 18.06.2025
Which are the main types of expenses?
In accounting practice, expenses are usually grouped into three main categories:
- Operating expenses: short-term in their nature and they are required to provide for the daily main business transactions. They are fully recognized as current expenses in the period in which they are incurred. The examples of operating expenses include:
- Rents;
- Personnel salaries;
- Utilities (water, electricity, gas);
- Advertising
- Business trips, etc.
- Capital expenses: Capital expenditures are long-term investments related to the acquisition, construction, or improvement of fixed assets, from which benefits are expected over a period of exceeding one year.. Capital expenses include the purchase, increase in value (and in certain cases the modernisation) of non-current assets such as:
- Acquisition of land and buildings;
- Acquisition of plant and equipment (machines, motor vehicles, computers);
- Enhancements and modernisation of existing non-current assets;
- Acquisition of non-current intangible assets such as software licenses, etc.
- Accounting depreciation and amortisation: non-monetary expense which reflects the wear and tear of a given non-current asset over time thus reducing its accounting value (which leads to decrease in the accounting profit, respectively the corporate tax due). Depreciable assets include:
- Non-current tangible assets (NCTA): such as buildings, machinery, equipment;
- Non-current intangible assets (NCIA): such as trademarks, copyrights;
- Investment properties (except land and those which are reported at fair value);
- biological assets such as flocks of sheep, herds of cows, or vineyards (except those which are reported at fair value).
What are some of the main specific features in the accounting of operating expenses?
Operating expenses are deducted (are recognised fully in the calculation of the financial result) during the accounting period in which they are incurred. Thus operating expenses are directly linked the accounting profit and respectively to the corporate income tax that the company owes at the end of the accounting period.
What are some of the main specific features in the accounting of capital expenses?
Capital expenses are reported as an increase in the non-current (tangible or intangible) assets in the balance sheet. At the same time the cash flows associated with capital expenses are reported in the cash flow statement in the section “investment activities”, since these are expenses incurred in the specific accounting period.
Unlike operating expenses, the capital expenses are not recognised all at once in a specific accounting period. Once the capital expense is recorded in the balance sheet (as a new asset or an improvement of an existing asset), it is amortised over time so as to allocate the asset’s value over its useful life. In other words, every year a portion of the non—current asset is spent. Such “spending“ is reported by means of the accounting depreciation/ amortisation expense, which is determined based on the depreciation/ amortisation rate chosen by the company.
What are some of the main specific features in the accounting of the depreciation / amortisation?
The percentage (or rate) by which the various types of the non-current tangible and intangible assets of the company are depreciated every month depending on the depreciation/ amortisation rates underlying the accounting policy of the company.
Accounting depreciation is calculated based on:
- The acquisition cost of the asset, reduced by its residual value (if such is determined);
- The useful life of the asset, as defined in the accounting policy;
- The method of depreciation – e.g., straight-line, declining balance, or others.
This “depreciation” is practically allocation of the value of the asset over its useful life, less the asset’s residual value (i.e. the value of the asset at the end of its useful life if the value is significant). The asset’s depreciation/ amortisation starts as of the beginning of the month of its acquisition or entering into exploitation (or the beginning of the following month) and continues until its actual and accounting depreciation.
| Important to know | |
 | The depreciation/ amortisation is related to the corporate income tax, and the depreciation / amortisation expense, which can be used to reduce the tax due is referred to as annual depreciation for tax purposes. It may differ in terms of the amount from the depreciation for accounting purposes and is calculated using a formula set out in Art. 58, para 3 of the Corporate Income Tax Act (CITA), according to the defined tax amortization norms in Art. 55, para 2 CITA. |
| For more information | |
 | Additional information regarding the accounting treatment of the acquired (through capital expenses) non-current assets is available in International Accounting Standard 16 (Property, Plant and Equipment), as well as in Accounting Standard 16 (Non-current Tangible Assets) of the National Accounting Standards:
Additional information regarding the accounting treatment of depreciation / amortisation expenses is available in Accounting Standard 4 (Depreciation) of the National Accounting Standards. |