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 the following:
Personnel-Related Expenses
Salaries and Wages:
Administrative staff
Executives
Office managers
Employee Benefits:
Health insurance
Retirement plans (e.g., 401(k) matching)
Paid time off (PTO)
Training and development
Payroll Taxes:
Social Security
Medicare
Unemployment taxes
Office Expenses
Rent or Lease:
Office space
Equipment leasing (e.g., copiers, printers)
Utilities:
Electricity
Water
Heating and cooling
Internet and phone services
Supplies:
Office supplies (paper, pens, staplers)
Cleaning supplies
Professional Services
Consulting Fees:
Business consultants
Management consultants
Legal Fees:
Retainers
Contract review
Litigation costs
Accounting and Auditing Fees:
Tax preparation
Financial audits
Payroll processing fees
IT Support and Software:
IT services
Office software subscriptions (e.g., Microsoft Office, accounting software)
Cloud services (e.g., storage, SaaS tools)
Other Administrative Costs
Insurance:
General liability insurance
Property insurance
Directors and officers (D&O) insurance
Depreciation and Amortization:
Office equipment
Leasehold improvements
Licenses and Permits:
Business licenses
Regulatory permits
Travel and Entertainment:
Business travel for administrative purposes
Meals and entertainment for executives or staff meetings
Postage and Shipping:
Mailing supplies
Courier services
Dues and Subscriptions:
Memberships in professional organizations
Subscriptions to trade publications
Miscellaneous
Recruitment and Hiring Costs:
Job advertisements
Background checks
Recruitment agencies
Banking Fees:
Account maintenance fees
Wire transfer charges
Bad Debt Expense:
Write-offs for uncollectible accounts