Administrative expenses definition
/What are Administrative Expenses?
Administrative expenses are those expenditures associated with the general oversight and operation of a business. They are not directly associated with the provision of goods or services to a firm’s customers.
How to Account for Administrative Expenses
Administrative expenses are classified as period costs, so they are charged to expense as soon as they are incurred. They are never capitalized. If a business is operating under the cash basis of accounting, then these items are charged to expense when paid.
Presentation of Administrative Expenses
Administrative expenses are listed in the lower part of the income statement, after the cost of sales and before non-operating expenses. They are not included in a reporting entity’s cost of goods sold.
Examples of Administrative Expenses
Some of the expenses classified as administrative expenses include accounting and finance compensation and benefits, corporate compensation and benefits, corporate rent and other facility costs, depreciation on corporate fixed assets, human resources compensation and benefits, general liability insurance, information technology compensation and benefits, and office supplies.