In an income statement, which item is classified as an operating expense?

In an income statement, operating expenses are the costs that a company incurs during its regular business operations to generate revenue. Advertising expenses fall under this category because they are necessary to promote the business and generate sales. Such expenses are crucial for maintaining and boosting a company's market presence and are classified as operating expenses on the income statement.

Cost of goods sold, on the other hand, represents the direct costs attributable to the production of the goods sold by a company. While it is essential for determining gross profit, it is not classified as an operating expense in the same way that advertising is.

Revenue signifies the total income earned by the business from its operations, including sales of products or services, and is not an expense but rather a measure of financial performance.

Gross profit, which is calculated by subtracting cost of goods sold from revenue, provides insight into the company's profitability before accounting for operating expenses. However, it is again not categorized as an operating expense. Instead, it represents the profit made from core business activities before the deduction of operating expenses such as advertising.