This gives you a clear picture of where you spend money, so that you can make cost-reduction efforts in that area. An income statement is one of the three major financial statements that reports a company's financial performance over a specific accounting period. expenses which are not attributable to direct production or delivery of the products or services of a company However, expenses related to the premise specifically and exclusively used for the project activities, like Training Centers, Library etc.. are not considered in the administrative expenses. General and administrative costs are not directly attributable to the production of goods and services. Companies that have centralized management tend to have higher general and administrative expenses. Salary of accountant or office support staff and travel and other expenses of them should be considered as administrative expenses. Based on the availability of data, one can calculate administrative expenses. Here are some examples of administrative expenses: Executive salaries and bonuses ; Professional fees, such as legal, consulting, and audit fees ; Decentralizing and delegating certain functions to subsidiaries can significantly lower general oversight expenses. 1973), the court observed that administration expenses include (1) executor's commissions; (2) attorney's fees; and (3) miscellaneous expenses. Typically, any cost that does not link to the production or the selling process and is not part of research and development is classified as a general and administrative expense. General services of office building maintenance, rent, etc. You can learn more about financing from the following articles –, Copyright © 2020. Example of administrative expense includes finance and insurance cost whereas selling commission forms part of selling expenses. Here we discuss the list of administrative expenses along with examples and differences from selling expenses. Attorney fees. Examples include the salaries and fringe benefits of the company president, human resource personnel, accounting, information technology, the depreciation expense for equipment and space used in administration, as well as supplies, utilities, etc. General And Administrative Expense Budget Example. The specific costs for hiring labor to produce a product is calculated separately, under cost of goods sold, and are not operating expenses. White Oak shall be allowed the total amount of $20,128.06 as an Allowed General Administrative Claim … Different accounting ERPs do nowadays have internal bifurcation and classify cost as a direct cost, selling cost, administrative expenses, factory cost, etc. An example of an administrative expense would be salaries and benefits for secretaries and receptionists. Many of the costs in the variable overhead account sound similar. Overhead costs are expenses that are not directly tied to production such as the cost of the corporate office. Because administrative expenses do not directly contribute to sales or production, there is a strong incentive for management to lower a company's general and administrative expenses. Another example of an administrative expense is the cost of leasing or renting space for the organization. It is vital for an organization to identify and classify costs into various categories for the purpose of cost optimization, reducing cost, and increasing efficiency of production. Depending on the nature of cost incurred, the administrative cost may be independent of the production quantity level, or it may vary with respect to change in a specific range of production levels. These expenditures are the same as selling, general and administrative expenses. Salaries and wages cost of employees engaged in finance, accounts, human resources, information technology division, etc. These included fixed expenses that are uniform and predictable over time such as rent. 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