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Examples of operating expenses are the cost of goods sold and marketing expenses, while examples of non-operating expenses are interest expense and lawsuit losses. If the amount paid had been higher than the capitalization limit, then it instead would have been recorded as an asset and charged to expense at a later date, when the asset was consumed. Under the accrual basis of accounting, an expense is recorded as noted above, when there is a reduction in the value of an asset, irrespective of any related cash outflow. Under cash basis accounting, an expense is usually recorded only when a cash payment has been made to a supplier or an employee.
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