Answer to Question #111717 in Accounting for Shermano

Question

Zaid's financial year ends on 31 October. On 1 November 20-6 he owed advertising costs of $40. During the year ended 31 October 20-7 he paid advertising costs of $530. This included $270 for an advertising campaign for 6 months to 29 February 20-8.
How much did Zaid charge to the income statement for the year ended 31 October 20-7?
Show the ledger and income statement.

Answer 1

Fin Statement for the year period 31 October 20-6 - 31 October 20-7

Income statement includes:

1)$40 advertising cost

2)$260 (530 - 270 for campaign)

3) $90 ( 2 months of campaign) -> explenation / 6 months of campaign ended in 29 February includes February 20-8, January 20-8, December 20-7, November 20-7, October 20-7, September 20-7.

Our financial year ends in October 31. As result, we include September and october only.

270/6*2=90