General and Administrative Expense
BeginnerGeneral and administrative expenses are the overhead costs of running a business that are not directly tied to producing goods or selling them, such as office rent, management salaries, accounting, legal fees and insurance.
Every business needs certain functions just to operate: senior management, finance, human resources, IT support, legal services and office facilities. Their costs are grouped together as general and administrative expenses, often shortened to G&A.
G&A expenses are part of operating expenses on the income statement. They are often combined with selling expenses and reported as selling, general and administrative expenses (SG&A).
For example, a company's G&A might include 200,000 of head office salaries, 60,000 of office rent, 25,000 of audit and legal fees and 15,000 of insurance, totalling 300,000.
G&A costs tend to be relatively fixed, so they do not rise much when sales increase. This means that as a business grows, G&A often falls as a percentage of revenue, which helps profit margins. Investors often look at G&A as a share of revenue to judge how efficiently a company is run.
For worked examples and full lessons, visit notesbysara.org.