Few Q's regarding what an "Administrative Expense" is..

[lynxus]

Hi Guys,

I'm sorting some filing out and need to be sure I pick the right place for some bits.

Im guessing for HMRC, things like insurance, accounting, certain "business needed" subscriptions would be an Administrative Expense.

However, Where does Advertising fit into this picture?

Im guessing its not an AE nor a cost of sale?

Or is it part of the cost of sale simply because without it, you wouldnt get the sale?

Im guessing ALL outgoings will end up in either "Cost of sale" or "Admin Expenses" right?

Thanks
Graham

 

[arnydnxluk]

I understand advertising to be an administrative expense because it doesn't contribute towards the cost of manufacturing or providing a specific product. Best to wait until one of the more clued up people come along and give a certain answer though

 

[lynxus]

I understand advertising to be an administrative expense because it doesn't contribute towards the cost of manufacturing or providing a specific product. Best to wait until one of the more clued up people come along and give a certain answer though

Hey, thanks for the reply,

Im guessing ALL outgoings will end up in either "Cost of sale" or "Admin Expenses" right?
(Adding this to my question )

 

[Scalloway]

I looked at what one software manufacturer suggests what goes under Admin and they give this list (which is not exhaustive).

Telephone and fax, Postage, Stationery and printing, Courier services, Information and publications, Subscriptions, Bank charges, Insurance, Equipment expensed, Equipment hire, Software, Repairs and maintenance, Depreciation, Amortisation of goodwill, Bad debts, Sundry expenses.

I would include advertising.

 

[UK Contractor Accountant]

Im guessing ALL outgoings will end up in either "Cost of sale" or "Admin Expenses" right?

Thanks
Graham

No - you also have 'Distribution' costs as a heading within Statutory accounts.

Some leading software providers categorise Advertising as a Distribution Cost.

 

[SBlundell]

Advertising should be fine in Administrative expenses (it isn't likely to make any significant difference to anything)

Or is it part of the cost of sale simply because without it, you wouldnt get the sale?

Although I see your logic, this doesn't make it a Cost of Sale. Arguably without the phone lines and the internet connection you wouldn't be able to make contact with your customers, so these would be Cost of Sales too? Without your office you wouldn't have anything to work from, so are Rent costs and Building insurance also Cost of Sales? The list goes on.

 

[ME Accountants]

Administrative expenses would cover advertising, expecially when it comes to condensed profit which groups most expenses into on column. I would not class it as a cost of sale because cost of sales is the purchase of products that you are going to sell so when sales go up cost of sales will also go up.

You could spend alot on advertising and get next to no sales (hopefully the other way around). I would also not class rent and insurance as cost of sales as again these are not directly linked to sales, they are regular expenses of the the business.

 

[HumanBondTaxAdvisers]

Cost of sales/Goods sold refer to all the expenses/cost to work out inventory that you have sold for the financial period . Cost of inventory delivery to YOUR warehouse is included in it.

Distribution expense refers to all the cost incurred in delivering goods to your customer. like postage cost etc.

Selling expense refers to marketing and advertisement cost. Admin expense refers to general costs that you cannot classify anywhere. If no selling expense headline is given then you can classify such expense to Admin expense.