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Depreciation contributes to operating expenses on the income statement because it represents the allocation of the cost of tangible assets over their useful lives. When a business owns assets like machinery, equipment, or vehicles, these assets lose value over time due to wear and tear, usage, or obsolescence.

By including depreciation as an operating expense, a business can match the expense of using the asset with the revenues generated from its use, ensuring that financial statements accurately reflect the true profitability of the company. This aligns with the accrual basis of accounting, where expenses are recognized when incurred, not necessarily when cash is paid.

Operating expenses include costs associated with running the business day-to-day, such as rent, utilities, and salaries. By recognizing depreciation within this category, it helps provide a clearer view of the company's financial performance and operational efficiency, contributing to the overall calculation of net income. This nuanced understanding of expenses is crucial for evaluating the long-term profitability and financial health of a business.