Operating costs and Operating payments

Operating costs differ from operating payments in the same way that operating revenues differ from operating receipts. Operating payments are the same as operating costs for a given period only when adjusted for:

1)timing differences arising from the company’s payment terms (credit granted by its suppliers, etc.);

2)the fact that some purchases are not used during the same period. The difference between purchases made and purchases used is adjusted for through change in inventories of raw materials.

These timing differences give rise to:

1)changes in trade payables in the first case;

2)discrepancy between raw materials used and purchases made, which is equal to
change in inventories of raw materials and goods for resale.

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