In one sentenceThe costs of running the business as a whole that are not directly linked to production or selling, such as management salaries, office rent, subscriptions and professional fees.
Simply put
These expenses are mostly fixed, so they do not fall much if sales drop. That is why you watch their ratio to sales: if the ratio rises, management is heavier than the volume of work.
Put each expense in its right place: a sales rep's salary is a selling expense, and the accountant's salary is an administrative expense.
Worked example
A trading company has sales of 3,000,000 SAR, management salaries of 240,000 SAR, office rent of 60,000 SAR, and subscriptions and fees of 12,000 SAR.
Management salaries240,000
Office rent60,000
Subscriptions and fees12,000
Total312,000
Ratio to sales = 312,000 ÷ 3,000,00010.4%
Don't confuse it with
Selling and distribution expensesSelling expenses relate to reaching the customer and delivering to them, and administrative expenses to running the business in general.
in FullScreen ERP
Cost centers in the system show the profitability of each branch, project or department. General accounts