🔬 Research and Development (R&D)

What it is: Money spent on creating new products, improving existing products, or developing new technology. For many companies — especially software, biotech, and manufacturing — this is a significant expense. If your business doesn't do formal R&D, enter 0.

What counts as R&D?

• Salaries for engineers or scientists working on new product development
• Software development costs (if expensed, not capitalized)
• Lab supplies, prototype materials
• SR&ED (Scientific Research & Experimental Development) expenditures in Canada
• Any amounts claimed on IRS Form 6765 (US R&D tax credit)

Where to find it: On your P&L under "Operating Expenses," look for lines labeled Research & Development, Product Development, or Engineering.

Note: Under GAAP (ASC 730), most R&D costs are expensed as incurred, not capitalized. Use the expensed amount from your P&L, not any capitalized software costs from your balance sheet.