Incurred Advertising Expense On Account

Definition of advertisement expense
Classification and presentation
Journal entries
Examples

Definition of advertizing expense

Advertising expense refers to cost incurred in promoting a business, such equally publications in periodicals (newspapers and magazines), television, radio, the net, billboards, fliers, and others. Since the accountants cannot measure the future do good of the advertising, the advertizement costs must be reported every bit Advertising Expense at the time the ads are run.

A prepayment of the cost of ads that will air in the future should exist recorded in a current asset account such every bit Prepaid Ad. When the ad is aired, the corporeality must be transferred from Prepaid Advertisement to Advertising Expense.

Classification and presentation

Ad Expense is an expense account. Information technology is role of operating expenses in the income statement. Sometimes, companies pay for advertisements in advance to media companies. These avant-garde payments are treated equally assets (prepaid advertising) and just get part of expense once the advertising services have been performed.

Periodical entries

The basic journal entry to record advertising expenses and the payment of such is

Ad Expense	xx.xx
Cash		xx.xx

If the business pays for advertisements in advance, the journal entry would exist:

Prepaid Advertising	xx.xx
Cash		20.xx

When the advert service has been performed, prepaid advert shall exist transferred to advertising expense.

Advertizement Expense	xx.xx
Prepaid Advertising		xx.xx

Examples of advertizement expense

Let's assume that in Apr a corporation paid Rs 15,00,000 to set an advertising and to book a time for it to be shown during the IPL lucifer in early June. Until June, the Rs 15,00,000 is the electric current asset as prepaid advertising. After the advertising is shown in the IPL match, the corporation must credit prepaid advertising and debit advertising expense. This is necessary because the accountants cannot measure the sales (if whatever) that will occur because of the IPL ad.

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