How to Calculate General and Administrative Expenses

General and administrative expenses are the costs incurred by a business as a result of carrying out the day-to-day operations. They are mainly comprised of overhead costs (costs that are not directly related to production) in the production activities of the business, costs attributable to hiring and maintaining employees and the costs that relate to expenses of acquiring office equipments and materials. Businesses present general and administrative expenses — sometimes referred to as operating expenses — from manufacturing expenses when preparing income statements at the end of each accounting period. To calculate general and administrative expenses, you need to refer to the general ledger accounting records to ascertain the occurrence and costs of all the general and administrative expense transactions.

Gather all your general ledger accounting records. The general ledger is the book where you record all your financial transactions that occur in your business. List all the expenses and check through to ensure they are accurate.

Classify the expenses into three categories: cost of goods sold comprising expenses relating to the production of goods and services; finance and revenue expenses that arise from investments; and operating expenses comprising the general and administration costs.

Separate all the general and administration expenses from the rest of the operating expenses. Some of the general and administration expenses may include: payroll expense, depreciation expenses, rent expense, repairs, taxes, advertising costs, insurance expense, interest on loans and office operations costs.

Add all the general and administration expenses you incurred in the business. Ensure that you add up all the expenses that fall under this category. This will give you the total amount of money your business spent on expenses that relate to general and administration expenses category.

Tips

  • If you are self-employed and you drive your car to your business, include all the expenses relating to this to the general and administrative expenses.

Warnings

  • Do not include selling and marketing costs though they are operating expenses because they do not fall under general and administrative expenses category.

References

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About the Author

Paul Merchant started writing in 2005. His articles have appeared in “JSTOR Journals” and “Wileys Management Journals.” He is a certified public accountant and a qualified project management expert. Merchant holds a Bachelor of Arts in communication from the University of Nairobi.