# Advertising expense balance sheet classification

The advertising expense balance sheet is usually kept in one of two ways:

### 1. By a single category (Advertising, General, Other): This is the most commonly used approach.

2. By two categories (Advertising, General, Other, Non-Ad): The second most common approach is to split the categories into two.

The second-highest priority category is your general expense.

The advertising expenses of an account are calculated by the advertising expenses formula.

The formula is as follows:

The average advertising expense of a single account is calculated by the standard advertising expense formula:

For example, let’s say you have an account that has expenses of \$15,000 and an advertising expense of \$10,000. Your advertising expense is 20% of your total expenses, which is \$6, 000.

Advertising expense of each account is calculated using the advertising expenses formula. This is because there are many factors that could affect expenses in each account, such as the type of advertising and the effectiveness of its use.

Advertising expenses of each account is expressed as a percentage of the total advertising expenses of the account. In our example, the advertising expense of the account is 20% of the total advertising expenses of the account. Multiplying that by 100 gives us a percentage of 40%.

The formula for calculating advertising expenses is as follows:

The advertising expenses of each account is calculated using the advertising expenses formula.

### General expense

General expense is the total amount of general expenses that you pay for.

General expenses are paid for by your company as a whole, and not by individual departments. General expenses are typically paid monthly, quarterly, annually, or occasionally.

For example, you would pay general expenses monthly if the company does not have a quarterly reporting period.

General expenses are also paid for on a recurring basis, such as on a quarterly basis, or a yearly basis.

General expenses are calculated using the general expense calculation formula. The formula is as follows:

• General Expenses = General Expenses of Other Accounts’ General Expenses

For the example above, the general expense of the account is \$3,000. Multiplying that by 100 gives us a percentage of 30%.

The formula for calculating general expenses is as follows:

• General Expenses = General Expenses of Other Accounts’ General Expense

The general expenses of each account is calculated using the general expenses calculation formula.

### Other expense

Other expense is an expense item that is not part of your advertising expenses. These expenses are primarily for things that you purchase out of your own budget, such as:

Non-ad expenses are expenses that are not directly related to advertising. Examples include employee expenses, general office expenses, and other miscellaneous expenses.

Non-ad expenses are calculated using the non-ad expense formula. The formula is as follows:

• Other Expenses = Other Expenses of Other Accounts’ Other Expenses

For example, the non-ad expenses of the account are \$3,000. Multiplying that by 100 gives us a percentage of 30%.

The formula for calculating non-ad expenses is as follows:

• Other Expenses = Other Expenses of Other Accounts’ Other Expense

The non-ad expenses of each account is calculated using the non-ad expense formula.

Ad expenses are expenses that are specifically related to advertising, such as:

• Advertising costs of other accounts

Ad expenses are calculated using the ad expenses calculation formula. The formula is as follows:

For example, the ad expenses of the account are \$3,000. Multiplying that by 100 gives us a percentage of 30%.

The formula for determining ad expenses is as follows:

The ad expenses of each account is calculated using the ad expenses calculation formula.

## Profit

Profit is calculated using the formula:

For example, let’s say that your company has an advertising expense of \$10,000. Ad expenses is \$20,000, which gives you a profit of \$10,000.

Profit of each account is calculated by dividing its advertising expenses by its advertising expenses of the account.

Profit calculation is the most difficult part of advertising expense calculation. It is because the formula is more complex than other formulas. If you are not careful, you can end up with an incorrect calculation.

## How to Calculate Advertising Expenses?

Before you calculate advertising expenses, you need to know what advertising expenses are.

All advertising expenses are expenses that you pay for in order to promote or advertise your company. The expenses might be for printing material and other media you need to advertise your company’s products or services. They are also expenses like postage, printing, and the cost of your advertising design and creative services.

Advertising expenses are also expenses like office supplies, your employees’ salaries, and other miscellaneous expenses.

For example, let’s say that your company sells camping gear and sells its products to other companies. Its advertising expenses for a particular year will be different from the year previous.

Advertising expenses of one year might include something like printing your company’s logo on t-shirts for example. In another year, they might not.

Advertising expenses of a year is calculated by determining the amount of money that your company spends on advertising that year. It then subtracts the amount of money that your company spent on advertising that year from the advertising expenses of the year before it.

That is the total advertising expenses of the year.

The advertising expenses of the year before it should be subtracted from the advertising expenses of the current year.

### Over to you

Now that you understand what advertising expenses are, you are ready to calculate them.

When you multiply \$15,000 by 100, you get \$165,000.

The amount of money your company spends on advertising in a year is \$165,000.

Images by Freepik

Generated by AI