Administrative Expenses
What are Administrative Expenses?
Administrative expenses form part of operating expenses and include things like rent, insurance, utilities etc.
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How they Work
Administrative expenses are expenses incurred in the day-to-day running of the business.
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For example, to operate the business, the business may need to pay rent.
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Administrative expenses will need to be paid, regardless of whether or not the business makes sales.
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For example, rent needs to be paid every week, fortnight, or month, regardless of whether the business makes sales.
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Furthermore, administrative costs will remain the same, regardless of whether sales rise or fall.
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Because of this, they are said to be fixed costs.
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How they Appear on the Income Statement
General and administrative expenses are shown on the income statement under the gross profit section.
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If shown together with selling expenses, the grouping is referred to as selling, general and administrative expenses.
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© R.J. Hickman 2020