What Is G&A Expense in Accounting?

General and Administrative (G&A) expenses are a category in business accounting that reflects the non-production costs necessary to operate a company. These expenses are distinct from the direct costs associated with creating goods or services. Analyzing G&A expenses provides insights into how efficiently a business manages its overhead and supports its core operations.

Defining General and Administrative Expenses

General and Administrative (G&A) expenses are costs a business incurs that are not directly tied to the production of goods or services or selling activities. They are overhead costs for the overall management and operation of the business.

G&A expenses are considered indirect costs because they benefit the business as a whole rather than a specific product, service, or sales effort. Many of these costs are fixed or semi-fixed, meaning they do not fluctuate directly with changes in sales volume or production levels. For instance, rent for an administrative office remains consistent regardless of how many units are sold.

Common Expenses Within G&A

The G&A category includes expenses that support general business functions. Salaries and benefits for administrative staff, such as human resources, accounting personnel, and executive management, are common examples. These individuals provide services that benefit the entire organization, not just a specific product line or sales team.

Occupancy costs also fall under G&A, including rent and utilities for corporate headquarters or administrative offices. Other recurring expenses like office supplies, general business insurance (e.g., general liability or property insurance not specific to manufacturing), and depreciation of administrative assets such as office equipment are classified here. Professional fees paid for legal, accounting, audit, or consulting services also belong in this category. Travel expenses for administrative personnel, unrelated to direct sales or production trips, can be included.

Distinguishing G&A from Other Operating Costs

G&A expenses are distinct from other operating cost categories, particularly Cost of Goods Sold (COGS) and Selling Expenses. COGS represents the direct costs attributable to producing goods or services, encompassing raw materials, direct labor, and manufacturing overhead. For example, the cost of fabric for a clothing manufacturer or the wages of assembly line workers are COGS, whereas the salary of the company’s human resources manager is a G&A expense. COGS fluctuates directly with production volume, while G&A supports the entire business infrastructure regardless of production levels.

Selling expenses, by contrast, are costs directly related to marketing, promoting, and selling a product or service. Examples include advertising campaigns, sales commissions, salaries for the sales force, and delivery costs. While both G&A and selling expenses are part of a company’s overall operating expenses, selling expenses generate revenue through direct sales efforts. G&A expenses, however, fund administrative and managerial functions that enable the business to operate, without directly engaging in sales activities.

Analyzing G&A in Financial Reporting

General and Administrative expenses are featured on a company’s income statement, a financial report summarizing revenues, expenses, and profits. G&A expenses are presented below the Cost of Goods Sold and are grouped under “Operating Expenses” or “Selling, General, and Administrative (SG&A) Expenses.” This placement helps in the calculation of a company’s operating income, which is determined by subtracting operating expenses (including G&A) from gross profit.

Businesses track and analyze G&A expenses to monitor their operational efficiency and assess overall profitability. Effective management of these costs can significantly impact a company’s bottom line. Analyzing G&A provides insights into how well a company controls its overhead and allocates resources for its general operations. This analysis aids in budgeting, forecasting future spending, and making informed financial decisions to ensure the business remains competitive and financially sound.