what are general and administrative g a expenses 
general and administrative g a expenses are incurred in the day to day operations of a business and may not be directly tied to a specific function or department within the company general expenses pertain to operational overhead expenses that impact the entire business administrative expenses are those that can t be directly tied to a specific function within the company such as manufacturing production or sales g a expenses include rent utilities insurance legal fees and certain salaries they re a subset of the company s operating expenses excluding selling costs understanding general and administrative g a expensesgeneral and administrative g a expenses are listed below the cost of goods sold cogs on a company s income statement the top section of an income statement always displays the company s revenues for the given accounting period cogs is deducted from the net revenue figure to determine the gross margin the g a expenses are then deducted from the gross margin to arrive at net income not all general and administrative expenses are grouped as one line item fees and interest may be classified as their own line item when deducting expenses to arrive at net income 1a portion of g a expenses will still be incurred even in the absence of any production or sales many g a expenses are therefore fixed dollar amounts that aren t easily affected through cost reduction strategies other g a expenses are semi variable some minimum level of electricity will always be used by a business just to keep the lights on and necessary machines running measures can be taken to reduce unnecessary spending on electricity beyond that point g a expenses can be eliminated without a direct impact on the production or sale of goods and services so management has a strong incentive to minimize these types of expenses companies with centralized management typically experience higher g a expenses compared to companies with decentralized management structures the sales to administrative expense ratio compares a company s sales revenue to the amount of expenses incurred in supporting operations most g a expenses incurred can be deducted on the entity s tax return provided the expenses are reasonable ordinary and necessary these expenses typically must be deducted in the year they were incurred and they must have been used during the usual course of business 2g a expenses are those that are related to the day to day costs of running a business they can vary depending on the industry or the individual company examples of general and administrative g a expensesexamples of general and administrative g a expenses include building rent consultant fees depreciation on office furniture and equipment insurance supplies subscriptions and utilities salary and benefits that are attributable to certain employees such as corporate management as well as the legal accounting and information technology it departments are also classified as g a expenses 3a company may allocate its g a expenses to each business unit based on a percentage of revenue expense square footage or another measure to view the full costs associated with running certain units reviewing this information with internal management allows for more informed decisions about expanding or reducing individual business units xyz company can allocate the electricity costs to individual departments based on square footage if the total electricity bill is 4 000 per month and the business records the electricity bill under general and administrative expenses assume the production facility is 2 000 square feet manufacturing is 1 500 square feet accounting is 500 square feet and sales is 500 square feet the total square footage is 4 500 so the electric bill could be allocated out to each department like this production 1 777 78 2 000 4 500 4 000 manufacturing 1 333 33 1 500 4 500 4 000 and accounting and sales both receive 444 44 500 4 500 4 000 