In accounting, G&A stands for general and administrative expenses: the indirect costs of running a company that are not tied to making a product or closing a sale. Executive pay, office rent, legal and audit fees, business insurance, and accounting software all fall under G&A in accounting. These costs keep the corporate entity functioning, and they appear as a distinct category of operating expenses on the income statement so managers, lenders, and investors can gauge how efficiently a company runs its back office.
What Counts as a G&A Expense
The simplest test: if the cost would still exist even if the company sold zero units next month, it is probably G&A. These are period costs. They hit the income statement in the quarter they occur rather than getting folded into the cost of inventory.
Typical G&A line items include:
- Executive and administrative pay: salaries, bonuses, and benefits for the CEO, CFO, HR staff, and IT support, along with other roles that serve the whole organization rather than one product line.
- Office occupancy: rent or mortgage payments on a corporate headquarters, plus utilities like electricity, water, and internet for administrative buildings.
- Professional fees: payments to outside lawyers, auditors, and consultants. Annual audit fees for a small private company might run a few thousand dollars; complex corporate litigation or large-company compliance audits can easily exceed six figures.
- Insurance: general liability, directors and officers (D&O) coverage, property insurance on office space, and business interruption policies.
- Office supplies and software: stationery, postage, ERP platforms, HR information systems, and other management-layer subscriptions.
- Regulatory compliance: state annual report filing fees, business registration renewals, and professional licensing costs for the entity itself.
Each of these supports the corporate shell rather than generating a specific sale. That distinction drives how the numbers land on the income statement. G&A sits with operating expenses, separate from cost of goods sold (COGS). Unlike COGS, which rises and falls with production, G&A tends to be relatively fixed in the short run, which is why investors watching for overhead bloat spend so much time on it.
G&A vs. SG&A on the Income Statement
You will run into “SG&A” far more often than “G&A” when reading financial statements. Selling, general, and administrative expenses (SG&A) is the broader line that bundles sales commissions, advertising, and marketing together with the purely administrative costs above. Many public companies report a single SG&A figure rather than splitting G&A out on its own.
When a company does break the number apart, the selling portion covers costs tied to generating revenue: sales team salaries, trade show costs, advertising campaigns, and shipping to customers. G&A captures everything else that keeps the corporate entity running. If you are benchmarking your own overhead against a competitor, make sure the categories match. A competitor’s “G&A” that quietly includes selling expenses will look higher than yours if you separate them.
Under Generally Accepted Accounting Principles (GAAP), operating expenses sit directly below the gross profit line, where gross profit equals total revenue minus COGS. Subtracting operating expenses from gross profit gives operating income, which most analysts treat as the clearest read on the core business before financing costs and taxes enter the picture. In the FASB taxonomy, the standard element is “Selling, General and Administrative Expense,” presented as a single operating expense caption between COGS and operating income.1Financial Accounting Standards Board (FASB). Proposed Taxonomy Implementation Guide Disaggregation of Income Statement Expenses Subtopic 220-40 A company can choose to present G&A separately from selling expenses, but the combined SG&A presentation is more common.
Typical G&A Ratios by Industry
There is no universal “right” G&A-to-revenue ratio. The number varies with industry, company maturity, and how much infrastructure the business model demands.
- Manufacturing: typically 5% to 12% of revenue. Factories benefit from operational leverage as production scales, and most of their cost structure sits in COGS rather than administration.
- Technology: roughly 8% to 15%. Scalable software business models keep G&A relatively lean, though early-stage tech companies frequently run 20% to 40% while they build out governance and compliance before revenue catches up.
- Professional services: often 15% to 25%. People-heavy firms need more HR, office space, and administrative support per dollar of revenue.
- Mature companies across sectors: generally settle into a 6% to 12% range once growth stabilizes and fixed overhead is spread over a larger revenue base.
The textbook “10 to 20 percent” rule of thumb is a rough midpoint, and treating it as a target can mislead. A software startup at 30% is not necessarily wasteful, and a manufacturer at 14% may have a real problem. Compare within industry and growth stage.
Depreciation and Other Non-Cash G&A
Not every G&A charge involves writing a check. Depreciation on office furniture, corporate vehicles, and the servers in the executive suite is a G&A expense even though no cash leaves the bank account in the current period. The charge reflects the gradual consumption of the asset’s economic value over its useful life.
Amortization of intangible assets works the same way. If the company capitalizes internal-use software under ASC 350-40, the amortization of that software hits G&A when the software serves an administrative function. The same goes for patents or licenses used by management rather than in production.
These non-cash entries reduce reported operating income without affecting cash flow. Analysts who want a cash-focused read on performance often add depreciation and amortization back to operating income to calculate EBITDA (earnings before interest, taxes, depreciation, and amortization). Knowing which depreciation charges sit in G&A versus COGS helps you interpret both numbers correctly.
Are G&A Expenses Tax Deductible
Most G&A expenses are fully deductible in the year they are incurred, as long as they meet the IRS standard of being “ordinary and necessary” to the trade or business. Section 162 of the Internal Revenue Code allows deductions for salaries, rent, and travel expenses, among other items, provided the amounts are reasonable and not lavish or extravagant.2Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses An “ordinary” expense is one that is common and accepted in your line of work; a “necessary” expense is one that is helpful and appropriate, though it does not have to be indispensable.3Internal Revenue Service. Publication 334 Tax Guide for Small Business
A few categories carry special limits. Business meals are deductible at only 50% of their cost. Entertainment expenses, like tickets to a sporting event or a round of golf with a client, are not deductible at all. Food and drinks served at an entertainment event can still qualify for the 50% deduction, but only if they are invoiced separately from the entertainment itself.4Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses
Some expenses are never deductible regardless of how they are classified on the books. Fines or penalties paid to a government agency for violating a law cannot be deducted, and neither can illegal bribes or kickbacks.2Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses Lobbying and political expenditures are also off limits. These restrictions apply even when the payment would otherwise meet the ordinary-and-necessary test.
Insurance premiums are generally deductible when they cover business-related risks: general liability, workers’ compensation, business interruption, and professional malpractice policies all qualify. Self-insurance reserve funds and life insurance policies where the company itself is the beneficiary are not deductible.3Internal Revenue Service. Publication 334 Tax Guide for Small Business
Recordkeeping the IRS Expects
The IRS expects supporting documents for every G&A deduction claimed on a return. That means keeping cancelled checks, invoices, account statements, credit card receipts, and petty cash slips that show the amount paid and confirm the business purpose of each expense.5Internal Revenue Service. Publication 583 Starting a Business and Keeping Records
How long you need to hang onto those records depends on the situation:
- Three years from the filing date is the general rule for income tax return records.
- Six years if you fail to report more than 25% of your gross income.
- Four years for employment tax records, measured from the date the tax is due or paid, whichever is later.
- Indefinitely if no return was filed or if the return was fraudulent.
- For depreciable assets, until disposition. Keep documentation on office furniture, vehicles, and other depreciating G&A assets until the statute of limitations expires for the tax year in which you sell or dispose of the property.
Most accountants recommend keeping all business records for at least seven years to cover the longer limitation periods and any disputes that come up.6Internal Revenue Service. How Long Should I Keep Records
Why G&A Deserves More Attention Than It Gets
G&A is the line item that quietly grows when nobody is watching. Sales commissions scale with revenue, raw materials scale with production, but administrative overhead has a way of ratcheting up during growth periods and never coming back down. A company that doubled its headcount three years ago may still be paying for the extra office space, the upgraded ERP system, and the additional HR staff long after the hiring wave ends.
Comparing G&A ratios across companies in the same sector often surfaces the first signs of management discipline or its absence. A steadily declining G&A-to-revenue ratio suggests scale is working in the company’s favor. A rising ratio when revenue is flat suggests the back office is consuming resources the business cannot afford. Neither number tells the whole story alone, but paired with operating margins and cash flow trends, G&A efficiency is one of the clearest windows into how well a management team controls the costs it has the most discretion over.