What are administrative expenses?

Selling and administrative expenses

In fiscal accounting, the expense items are the ones that most retain the attention of business decision-makers, since they can provide clues on actions that can be taken to save or be more efficient.

Let us remember that some of the main functions of accounting are: to keep track of income and expenses; to determine the profits or losses obtained in certain periods, to keep track of the budget, among others. Therefore, it is very important to know what kind of expenses exist.

Expense always refers to the general administration of the organization. It is important to know this difference in order to record the accounts correctly in the accounting, since suppliers are written in the cost register, that is, they are companies that provide the raw material to make the finished product.

The accounts payable account will have subaccounts to specify to whom they are owed and the concept of the amount. For example, in one of them you can reflect the stationery creditor, which would be the company from which you buy pens, paper and other office supplies that are needed in the company. The electricity and telephone companies would also be included.

What are the administrative costs?

Administrative expenses, also known as operating expenses, are those that are incurred for the administrative operation of the company. It should be noted that this type of expenses are not subject to the commercial activity of the organization.

How are administrative expenses classified?

Therefore, administrative expenses include: office rent, telephones, electricity, salaries, wages, fees, bonuses, vacations, vacation bonus, Christmas bonus, IMSS, Infonavit, stationery and supplies, insurance, depreciation and amortization of equipment and facilities used by the administrative department, and the …

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What are the administrative and selling expenses?

These are all expenses directly related to the promotion, realization and development of the sales volume; examples include the following: Salaries of the heads of the sales department. Warehouse employees’ salaries. … Depreciation and maintenance expenses of delivery equipment.

General and administrative expenses

Administrative expenses will be part of a company’s income statement, which are listed below the cost of goods sold, and are considered as another type of expense within selling or general expenses.

Financial expenses are those that reflect the cost of seeking financing from third parties, i.e., the debts that a company has, such as financial interest and commissions paid in the opening of a loan.

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How should expenses and products be classified?

When there are financial expenses and products, the products should be classified first if their value is greater than that of the expenses, but the expenses should be classified first if their value is greater than that of the products.

How are expenses classified in the income statement?

The income statement is composed of nine main accounts: sales, cost of sales, gross profit, administrative expenses, operating income, financial expenses, income before taxes, taxes and net income.

What are expenses and examples?

Spending occurs when we allocate economic resources to obtain goods and services that satisfy our needs. Therefore, it is something we all do, spending, from buying bread or paying the electricity bill to buying a car or a television.

Administrative expenses puc

These expenses are not directly involved in a particular department, but are necessary to run the way the company operates and organizes itself. They are, in short, necessary for the correct operation of the business.

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They are mostly of a fixed type. That is to say, they will exist regardless of the level of sales, with hardly any variation in their amount. Moreover, they are usually the most difficult to justify in terms of profitability and efficiency ratios, since they are not involved in production or sales.

To identify administrative expenses, we must rule out their direct influence on the company’s operating activity. However, the following examples may help us to better understand the concept:

To see more clearly the difference between administrative and administrative expenses, some examples of these two types of expenses will be presented below. In this case we are going to use a retail company as a model:

What are the expense accounts in accounting?

Expense accounts are divided into four types: Asset accounts: This accounts for a company’s assets, i.e. its property and rights. Here belongs, for example, the money available in bank accounts. Liability accounts: These account for the company’s debts and obligations.

What are the financial expenses and products?

These are ordinary expenses and revenues derived from usual operations or transactions, i.e., those that are typical of the entity’s business, whether they are frequent or not: for example, discounts for early payment of documents that the entity grants or is granted. …

What is the difference between costs and products?

The difference between cost and expense is that the former indicates the investment necessary to produce a particular product, and on the other hand, the expense is the disbursement of money to carry out each of the activities required for the production of that product.

Selling expenses examples

1. General administrative or management expenses are those incurred by a company to carry out management, organization or control, and are not related to the production cycle.

However, specific administrative or management expenses incurred by the company that are clearly related to the process of constructing or manufacturing the product will be included in the calculation of the cost of production (Gadmon).

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3. The book value of the assets “eligible” to capitalize financial expenses shall be calculated as the average of the aforementioned assets during the year, less the amount of the subsidies, donations and specific legacies received for their financing.

a) Firstly, it is understood that the specific sources of external financing of each item are the first to be taken into account. For these purposes, specific sources of financing are those that have been unequivocally used to finance inventories or fixed assets under construction, and the simple nomination of the debt is not considered as such, i.e., in any case there must be an identification between the financed asset and the corresponding debt (…).