Expenses a firm incurs for insurance, office salaries, and rent are classified as:

• A. Operating expenses
• B. Capital expenditures
• C. Cost of goods sold
• D. Non-operating expenses

Answer: (A)

Verified step by step guidance

1. Understand the classification of expenses: Operating expenses are costs incurred during the normal operations of a business, such as insurance, office salaries, and rent. These are necessary for the day-to-day functioning of the business.
2. Differentiate between operating expenses and other types of expenses: Capital expenditures are investments in long-term assets, cost of goods sold relates to the direct costs of producing goods, and non-operating expenses are costs not related to core business operations.
3. Analyze the nature of the given expenses: Insurance, office salaries, and rent are recurring costs that support the business's operations but are not directly tied to the production of goods or services.
4. Classify the expenses: Since these costs are essential for running the business and are not related to production or long-term investments, they fall under the category of operating expenses.
5. Conclude that the correct classification for these expenses is 'Operating expenses,' as they align with the definition and characteristics of this category.