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