![]() They may be integrated with selling expenses (in which case the cluster of expenses is known as selling, general and administrative expenses), or they may be stated separately. General and administrative expenses appear in the income statement immediately below the cost of goods sold. Presentation of General and Administrative Expense Consequently, switching away from a command-and-control system can reduce these expenses. ![]() Instead, all expenses must be justified before they will be allowed into the next year’s budget.Ī company that has a strong, centralized command-and-control management system in place is likely to spend much more on general and administrative expenses than a business that has a decentralized organizational structure, and which therefore does not require extra staff to control the activities of subsidiaries. One control technique is zero-base budgeting, where budgets are not automatically rolled forward from the prior year. Management should maintain tight control over these costs, since they increase the break even point of a business. However, many of these expenses are fixed in nature, and so can be fairly difficult to eliminate in the short term. JWhat is Selling, General and Administrative Expense The selling, general and administrative expense (SG&A) is comprised of all operating expenses of a business that are not included in the cost of goods sold. There tends to be strong cost-reduction pressure on general and administrative expenses, since these costs do not directly contribute to sales, and so only have a negative impact on profits. How to Control General and Administrative Expenses General and administrative expense is generally not considered to include research and development (or engineering) expenses, which are usually aggregated into a separate department. There are many types of general and administrative expenses, including the following:Ĭorporate management wages and benefits (such as for the chief executive officer and support staff) Examples of General and Administrative Expenses ![]() This information is needed to determine the fixed cost structure of a business. ![]() Another way of describing general and administrative expenses is any expense that will still be incurred, even in the absence of any sales or selling activity. These expenses are not related to the construction or sale of goods or services. General and administrative expense is those expenditures required to administer a business. ![]()
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