---
title: "General and Administrative Expenses | Financial Accounting I"
description: "General and administrative expenses are overhead costs like rent, salaries, and office supplies that appear as operating expenses on the income statement."
canonical: "https://fiveable.me/financial-accounting/key-terms/general-administrative-expenses"
type: "key-term"
subject: "Financial Accounting I"
---

# General and Administrative Expenses | Financial Accounting I

## Definition

General and administrative expenses are the overhead costs a business needs to run that are not tied directly to making or selling goods. In Financial Accounting I, they are usually reported as operating expenses on the income statement.

## What It Is

General and administrative expenses, often called G&A, are the everyday running costs of a business that are not part of making inventory or closing a sale. In Financial Accounting I, you usually see them grouped with operating expenses on the income statement, because they support the business as a whole rather than one specific product.

Common examples include office rent, corporate salaries, utilities for the admin office, accounting fees, legal fees, insurance, and office supplies. If a company has an executive team, the salaries of those managers often show up here too, as long as those people are not working directly in production or sales. The basic idea is simple: if the cost keeps the business operating, but you cannot trace it to one unit of product, it likely belongs in G&A.

This is different from cost of goods sold, which tracks costs directly tied to the products sold. A factory worker assembling shoes is not a G&A cost, but the salary of the accountant who handles payroll usually is. That distinction matters because it changes how the income statement tells the story of the business.

G&A is also different from selling expenses. Selling expenses are connected to getting the product to customers, such as advertising or sales commissions. G&A covers the background support work, like bookkeeping, office administration, and corporate management.

A useful way to think about G&A is that it measures how much it costs to keep the business machine turned on. When G&A rises faster than revenue, the business may be getting less efficient. When it stays controlled, more of each sales dollar can flow down to operating income.

## Why It Matters

General and administrative expenses show up in the exact part of the income statement where Financial Accounting I asks you to separate different kinds of costs. If you can sort a cost into G&A, you can place it correctly on a multi-step income statement and avoid mixing it up with cost of goods sold or selling expenses.

That matters because the income statement is not just a list of numbers. It is meant to show how the business earns profit step by step, from sales to gross profit to operating income. G&A sits below gross profit and helps explain how much of the company’s sales are consumed by support functions and management overhead.

This term also helps you read real financial statements more carefully. Two companies can have the same revenue, but the one with heavier G&A may keep less profit from operations. That makes G&A a useful piece of the cost structure, especially when you are comparing businesses in the same industry.

In class problems, you often use G&A when deciding where a cost belongs, or when checking whether a multi-step income statement is classified correctly. A small placement error can change operating income, so this category is more than just a label.

## Connections

### Cost of Goods Sold (COGS)

COGS includes the direct costs of producing or buying the goods a company sells. G&A is different because it covers support costs that keep the business running, not product-level costs. If you confuse the two, your income statement will misstate gross profit and operating income.

### [Selling Expenses](/financial-accounting/key-terms/selling-expenses)

Selling expenses are tied to getting products or services to customers, like advertising, commissions, and shipping out to buyers. G&A costs support the overall business instead of the sales process itself. The split matters on a multi-step income statement because both appear below gross profit, but they tell different parts of the profit story.

### Operating Expenses

G&A is one category inside operating expenses. Operating expenses also include selling expenses, and together they are subtracted from gross profit to find operating income. When you see G&A, think of it as the admin and overhead slice of the broader operating cost group.

### [Operating Income](/financial-accounting/key-terms/operating-income)

Operating income is what remains after gross profit is reduced by operating expenses, including G&A. If G&A increases while sales stay flat, operating income drops. That makes G&A one of the line items you check when analyzing whether a company is controlling overhead well.

## On the AP Exam

A quiz question may give you a list of business costs and ask which ones belong in general and administrative expenses. Your job is to separate overhead from production and selling costs, then place the amount on the correct line of a multi-step income statement. In a problem set, you might classify office rent, executive salaries, or accounting fees as G&A and explain why they are not COGS. If the question gives you a partial income statement, you may need to use G&A to calculate operating expenses or operating income. The main move is classification, not memorization of one fixed list.

## General and Administrative Expenses vs Selling Expenses

These two get mixed up because both are operating expenses, but they serve different functions. Selling expenses are tied to marketing, distribution, and closing sales, while G&A covers the general support work of the business, like admin salaries and office costs. If a cost exists because the company is trying to sell, it usually belongs with selling expenses. If it exists because the company has to run its office and management functions, it usually belongs in G&A.

## Key Takeaways

- General and administrative expenses are the overhead costs that keep a business running, but do not directly make or sell a product.
- In Financial Accounting I, G&A is usually reported as part of operating expenses on the income statement.
- Examples include office rent, utilities, accounting fees, legal fees, insurance, and administrative or executive salaries.
- G&A is not the same as cost of goods sold, because COGS tracks direct production or purchase costs for inventory.
- If G&A rises faster than revenue, it can squeeze operating income and signal weaker overhead control.

## FAQs

### What is General and Administrative Expenses in Financial Accounting I?

General and administrative expenses are the overhead costs a business pays to operate, such as rent, office salaries, utilities, and accounting fees. In Financial Accounting I, they are usually shown as operating expenses on the income statement. They are not direct production costs and not selling costs.

### Is General and Administrative Expenses the same as overhead?

It is a type of overhead, but not every overhead label is used the same way in every class or company. In most accounting problems, G&A refers to the administrative and corporate overhead needed to run the business. The key is whether the cost supports the whole company rather than one product or sale.

### What costs belong in General and Administrative Expenses?

Common examples are office rent, utilities, office supplies, insurance, legal fees, accounting fees, and salaries for administrative staff or executives. If the cost is connected to running the office, managing the company, or handling support functions, it often belongs here. Costs tied to making inventory or generating sales usually go somewhere else.

### How do I tell G&A from Selling Expenses?

Ask what the cost is doing for the business. If it helps bring in customers, advertise, or deliver the sale, it is usually a selling expense. If it supports the whole business in the background, like payroll processing or corporate office rent, it is usually G&A.

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