What is a General and Administrative Expense (G&A)?
General and administrative expenses (also called selling, general and administrative expenses, or SG&A) are the indirect costs of running a business. It is important to note that under the accrual method of accounting, G&A is recorded for the period in which it is incurred and not necessarily the period in which it is paid. For example, if insurance bills are paid in January but the insurance is for January, February, March, April, May, and June, then the insurance expense in January will not show the full amount of the bill; rather, it will show 1/6 of the amount of the bill.
How Does a General and Administrative Expense (G&A) Work?
For most businesses, G&A expense includes many of the following expense categories: salaries and benefits for 'back office' workers and senior executives, advertising and marketing costs, rent, insurance, utilities, repairs, dues and subscriptions, travel costs, office supplies, meals and entertainment, postage, government fees and legal expenses.
Why Does a General and Administrative Expense (G&A) Matter?
G&A expenses appear on the income statement. They are not part of the cost of goods sold but can constitute a significant portion of a company's expenses. Because this category often houses the salaries of the top executives, as well as many other expenses, it is often the target of cost-cutting when a company has cash-flow problems. Companies often create a variety of accounting categories within G&A expense, and different companies may give different names for the same type of expense (for instance, one company might lump all of its advertising expenses into one line item; another might create a series of specific line items for the same expenses).
