General and administrative expenses form part of any company’s financial statements but what are they really and what comprises them? Let’s all get to know with the help of our friendly team of Watford accountants.
Per definition, general and administrative expenses pertain to day to day costs of a business that are associated to back-end operations or to those that are indirectly related to the profit generating aspect of the business. They are likewise necessary to maintain daily operations and administer the business’ daily activities. For most cases, these are those outside of production, sales and marketing.
There are many expenses that fall under its umbrella. Let’s tackle a few of these below.
- Office Rent or Lease
Space used for divisions like Human Resource and Finance among others are included here. These are paid on a monthly basis at a fixed fee. In the event that you own the building where these offices are, rent expenses are not anymore part of this list.
- Office Furniture and Fixture Depreciation
Furniture and fixture in your office depreciate too just like the structure and will entail costs. They have to be accounted for to better exhibit their real time values as time goes by.
- Water, Electricity and Utility Bills
Outside of manufacturing and production, utilities are also used in the offices for a bunch of purposes from sanitation to running computers and many more.
- Accounting Expenses
You will also have to spend for the accounting aspect of your business and they fall under the general and administrative expenses regardless if you hire in-house employees or outsource the service from a firm.
- Insurance Expenses
This is the cost of insurance (e.g. fire) that has been incurred, has expired, or has been used up during the current fiscal period. The total amount is amortized over the years where it is considered to be useful and beneficial.
- Office Supplies and Inventory
The office uses certain supplies like inkjet cartridges, bond papers, folders, pens, coffee, creamer, staple wires, photocopying ink and the like. These fall under the office supplies expense in the general and administrative costs category. Such are expenses outright instead of amortized or depreciated as their benefits are immediately used up instead of spread out in several fiscal periods.
- Legal Services
All legal costs are part of the general and administrative expenses category too says Watford accountants. Examples of this include advisory services and contract among others.