General and Administrative Expenses

Administrative cost
An expense incurred in controlling and directing an organization, but not directly

identifiable with financing, marketing, or production operations.
The salaries of senior executives and costs of general services (such as accounting,
contracting, and industrial relations) fall under this heading. Administrative costs are
related to the organization as a whole as opposed to expenses related to individual
departments. Also called administrative expenses.
Read more: http://www.businessdictionary.com/definition/administrative-cost.html
Start with sales. Take your price per unit and multiply it by the number of units sold.
Using the cost per unit that we calculated previously, we can calculate cost of goods
sold by multiplying the cost per unit by the number of units sold. Calculate gross
profit by subtracting cost of goods sold from sales.
In accounting, general and administrative expenses represent the necessary costs to

maintain a company's daily operations and administer its business, but these costs are
not directly attributable to the production of goods and services. Information on this
type of expense is especially useful when calculating a company's fixed costs. Typical
items included in the general and administrative expenses are accounting staff
salaries, building rent, executives wages and benefits, depreciation on office fixtures
and equipment, and insurance, as well as legal counsel salaries, various office
supplies, accounting and tax fees, legal fees, and electricity and water bills.
General and Administrative Expenses

General and administrative expenses typically refer to expenses that are still incurred
by a company, regardless of whether the company produces or sells anything. This
type of expense is shown on the income statement, typically below the cost of goods
sold (COGS) and lumped with selling expenses, forming a selling, general and
administrative expense line item.
Typically, any cost that does not link to the production or selling process and is not
part of research and development is classified as a general and administrative expense.
For instance, a public company must hire external auditors to audit its financial
statements and footnotes on a regular basis. An audit fee is typically not associated
with a production process, but this cost is still incurred regardless of whether a
company produces anything or not. Audit fees, along with expenses of a similar
nature, such as rent, electricity, insurance and office supplies, are put into the general
and administrative expense account.
Learn How to Write a Financial Feasibility Study
Part 1 - Start-Up Capital Requirements

 Share
 Pin
 Share
 Email
•••
BY LAHLE WOLFE
Updated November 20, 2017
A financial feasibility study projects how much start-up capital is needed,

sources of capital, returns on investment, and other financial considerations. It
looks at how much cash is needed, where it will come from, and how it will be
spent.
The Purpose of a Financial Feasibility Study
A financial feasibility study is an assessment of the financial aspects of

something. If this case, for starting and running a business.
It considers many things including start-up capital, expenses, revenues, and
investor income and disbursements. Other portions of a complete feasibility
study will also contribute data to your basic financial study.
A financial feasibility study can focus on one particular project or area, or on a

group of projects (such as advertising campaigns). However, for the purpose
of establishing a business or attracting investors, you should include at least
three key things in your comprehensive financial feasibility study:
 Start-Up Capital Requirements,

 Start-Up Capital Sources, and
 Potential Returns for Investors.
Start-Up Capital Requirements
Start-up capital is how much cash you need to start your business and keep it
running until it is self-sustaining. You should include enough capital funds
(cash, or access to cash) to run the business for one to two years.
Finding Start-Up Capital Funding Sources
There are many ways to raise capital for your business, but no matter what
route you take, investors are more likely to invest, banks are more likely to
approve loans, and large corporations are more likely to give you contracts if
you have personally invested in the business yourself.
When you make a list of funding resources, be sure to include anything that
you can contribute to the business, including free labor. If you are starting
a nonprofit organization, your donated professional time may even be tax
deductible for you.
Potential Returns for Investors Feasibility Study
Investors can be a friends, family members, professional associates, client,

partners, share holders, or investment institutions.
Any business or individual willing to give you cash can be a potential investor.
Investors give you money with the understanding that they will receive
"returns" on their investment, that is, in addition to the amount that is invested
they will get a percentage of profits.
In order to entice investors you need to show how your business will make
profits, when it will begin to make profits, how much profit it will make, and
what investors will gain from their investment. The investment return section
should offer both a description of how investors will be involved and discuss
different variables that will affect the profitability of your business, offering
more than one scenario.
How You Should Pay Back Investors
How investors will be paid will vary according to individual investment offers.
Read every offer over very carefully - not all investors may be right for your
business.
The investment section of your financial feasibility study should not make
specific or binding offers to investors. Do not state investors will be paid
specific dollar amounts by certain dates. Instead, list general practices for
how investments return will be distributed, assuming different business
scenarios.
For example, you might state that investors will be paid X amount of dollars or
X% on their investment at the end of any business quarter where profits
exceed a certain threshold.
Project total revenue, deduct business expenses, and then from the remaining

amount, decide what percentage will be distributed to investors. You should
never promise 100% of the remaining amount to investors. You need to keep
cash on hand to continue operating your business, to grow your business, and
to build reserves.
Most investment returns are typically distributed on a quarterly, bi-annual, or

annual basis. Consider how the various distribution cycles could affect your
business' cash flow during the first two years of operation. In other words, do
not just run one set of numbers, examine each type of distribution and support
why you think the option you choose is the best one
What are some examples of
general and administrative
expenses?
By Andriy Blokhin | July 31, 2015 — 9:10 AM EDT
SHARE
A:
In accounting, general and administrative expenses represent the necessary
costs to maintain a company's daily operations and administer its business,
but these costs are not directly attributable to the production of goods and
services. Information on this type of expense is especially useful when
calculating a company's fixed costs. Typical items included in the general
and administrative expenses are accounting staff salaries, building rent,
executives wages and benefits, depreciation on office fixtures and equipment,
and insurance, as well as legal counsel salaries, various office supplies,
accounting and tax fees, legal fees, and electricity and water bills.
General and Administrative Expenses

General and administrative expenses typically refer to expenses that are still
incurred by a company, regardless of whether the company produces or sells
anything. This type of expense is shown on the income statement, typically
below the cost of goods sold (COGS) and lumped with selling expenses,
forming a selling, general and administrative expense line item.
Typically, any cost that does not link to the production or selling process and
is not part of research and development is classified as a general and
administrative expense. For instance, a public company must hire
external auditors to audit its financial statements and footnotes on a regular
basis. An audit fee is typically not associated with a production process, but
this cost is still incurred regardless of whether a company produces anything
or not. Audit fees, along with expenses of a similar nature, such as rent,
electricity, insurance and office supplies, are put into the general and
administrative expense account.
Cost Reduction Incentive

Because they do not directly contribute to sales or production, there is a
strong incentive on the part of management to lower a company's general and
administrative expenses. However, since these costs are typically fixed, there
is a limited scope in a company's ability to reduce them.
Companies that have a centralized management tend to have higher general

and administrative expenses. Decentralizing and delegating certain functions
to subsidiaries can significantly lower general oversight expenses.
Read more: What are some examples of general and administrative expenses? |

Investopedia https://www.investopedia.com/ask/answers/073115/what-are-some-
examples-general-and-administrative-expenses.asp#ixzz59DOB48Ht
Follow us: Investopedia on Facebook

General and Administrative Expenses

Uploaded by

Copyright:

Available Formats

General and Administrative Expenses

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

General and Administrative Expenses

Uploaded by

Copyright:

Available Formats

Administrative cost

An expense incurred in controlling and directing an organization, but not directly

Read more: http://www.businessdictionary.com/definition/administrative-cost.html

In accounting, general and administrative expenses represent the necessary costs to

General and Administrative Expenses

Learn How to Write a Financial Feasibility Study

Part 1 - Start-Up Capital Requirements

Updated November 20, 2017

A financial feasibility study projects how much start-up capital is needed,

A financial feasibility study is an assessment of the financial aspects of

A financial feasibility study can focus on one particular project or area, or on a

 Start-Up Capital Requirements,

Start-Up Capital Requirements

Potential Returns for Investors Feasibility Study

Investors can be a friends, family members, professional associates, client,

Project total revenue, deduct business expenses, and then from the remaining

Most investment returns are typically distributed on a quarterly, bi-annual, or

General and Administrative Expenses

Cost Reduction Incentive

Companies that have a centralized management tend to have higher general

Read more: What are some examples of general and administrative expenses? |

You might also like