General Expense

Definition

General Expense refers to costs incurred in the operation of a business other than selling, administrative, or cost of goods sold (COGS). These expenses are necessary to support the business’s functionality but are not linked directly to revenue generation activities or administrative functions. Examples include maintenance costs, utilities, and non-operational outlays.

Examples

Utilities: This includes expenditures on electricity, water, and gas.
Maintenance: Costs associated with the upkeep of company facilities, such as repair services.
Office Supplies: General office materials that are not necessarily tied to direct administration or sales functions.
Insurance Premiums: Payments for insurance policies covering general business operations.

Frequently Asked Questions

Q: How are general expenses different from operating expenses?
A: While general expenses are a subset under operational expenses, the latter includes a broader category encompassing selling, general, and administrative expenses (SG&A).

Q: Are general expenses tax-deductible?
A: Yes, general expenses are usually tax-deductible as long as they are essential and ordinary expenses incurred for the operation of the business.

Q: How are general expenses recorded in financial statements?
A: General expenses are listed under operating expenses on the income statement, contributing to the calculation of operating income.

Q: Can general expenses affect net profit?
A: Yes, since general expenses contribute to total operating expenses, they reduce the business’s net profit.

Q: Are salaries considered general expenses?
A: Salaries for administrative personnel would typically be considered under administrative expenses, not general expenses.

Operating Expenses: The total expense related to the function of a business, which includes selling, general, and administrative expenses.
Cost of Goods Sold (COGS): Direct costs attributable to the production of goods sold by a company.
Administrative Expenses: Expenses incurred by a business that are not directly tied to sales, such as salaries of executive personnel.
Selling Expenses: Costs that are directly related to the promotion and selling of products and services.

Online Resources

Suggested Books for Further Studies

“Accounting for Dummies” by John A. Tracy
A beginner-friendly guide that covers the basics of accounting, including detailed sections on different kinds of expenses.
“Financial Accounting Explained” by Can Akdeniz
This book provides a comprehensive explanation of all aspects of financial accounting and expense management.
“Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
A more advanced text covering a broader range of accounting topics, including expenses, is ideal for deeper study.

Fundamentals of General Expense: Accounting Basics Quiz

### Which of the following is considered a general expense? - [ ] Salaries of sales personal - [x] Utility bills - [ ] Cost of raw materials - [ ] Advertising fees > **Explanation:** Utility bills are general expenses as they are incurred to keep the business running but do not fall under selling, administrative, or COGS categories. ### General expenses are recorded on which financial statement? - [x] Income statement - [ ] Balance sheet - [ ] Statement of cash flows - [ ] Owner’s equity statement > **Explanation:** General expenses appear on the income statement as part of operating expenses. ### Are maintenance costs for office repair considered general expenses? - [x] Yes - [ ] No - [ ] Only if under a certain amount - [ ] Only if they relate directly to revenue generation > **Explanation:** Maintenance costs for office repairs are considered general expenses as they are necessary for the functioning of the business but do not directly relate to revenue operations. ### Which category do general expenses NOT include? - [ ] Utility bills - [ ] Office supplies - [ ] Maintenance costs - [x] Direct wages of production workers > **Explanation:** Direct wages of production workers fall under the cost of goods sold (COGS), not general expenses. ### Are general expenses tax-deductible? - [x] Yes - [ ] No - [ ] Only in certain jurisdictions - [ ] Only if they amount to less than a specified amount > **Explanation:** General expenses are generally tax-deductible as they are necessary business expenses. ### Which type of expense does not fall under general expenses? - [ ] Office supplies - [ ] Utilities - [ ] Equipment maintenance - [x] Marketing expenses > **Explanation:** Marketing expenses are usually categorized as selling expenses, not general expenses. ### Utility bills are an example of what kind of expense? - [ ] Administrative expense - [x] General expense - [ ] Selling expense - [ ] Cost of goods sold > **Explanation:** Utility bills are considered general expenses. ### Expenses for which kind of supplies would fall under general expenses? - [ ] Sales-related supplies - [ ] Administrative supplies - [x] General office supplies - [ ] Manufacturing supplies > **Explanation:** General office supplies are included in general expenses. ### What aspect of a company’s functioning do general expenses support? - [ ] Direct sales - [ ] Administrative tasks - [x] Overall operations - [ ] Product manufacturing > **Explanation:** General expenses support the overall operations of the business. ### Can insurance premiums for general business operations be considered general expenses? - [x] Yes - [ ] No - [ ] Only if it covers non-core activities - [ ] Only if related to product warranties > **Explanation:** Insurance premiums for general business operations are considered general expenses.

Thank you for delving into the essentials of general expenses with our comprehensive guide and engaging quiz. Continue nurturing your financial acumen!