Advertising Expense refers to price incurred in promoting a organization, such as publications in periodicals (newspapers and also magazines), tv, radio, the internet, billboards, fliers, and others.

You are watching: Prepaid advertising representing payment for the next quarter


Classification and Presentation of Advertising Expense

Advertising Expense is an price account. It is part of operating expenses in the earnings statement.

Sometimes, suppliers pay for advertisements in advance to media providers. These progressed payments are treated as assets (Prepassist Advertising) and also only come to be component of expense as soon as the declaring solutions have been perdeveloped.


Advertising Expense Journal Entries

1. The fundamental journal entry to record advertising costs and the payment of such is:

Dr. Cr.
Advertising Expense xx.xx  
Cash   xx.xx

2. If the company pays for advertisements in development, the journal enattempt would be:

Dr. Cr.
Prepassist Advertising xx.xx  
Cash   xx.xx

When the heralding business has been perdeveloped, prephelp heralding shall be transferred to declaring cost.

Dr. Cr.
Advertising Expense xx.xx  
Prephelp Advertising   xx.xx

The entry over is an adjusting enattempt. Adjusting entries are forced at the finish of eexceptionally duration to examine and also upday the company's accounts.

Examples

1. MADERA Co. contracted GEM Marketing Company type of to create and also distribute brochures. After the services were percreated, MADERA paid GEM $3,000. The journal entry would certainly be:

Dr. Cr.
Advertising Expense 3,000.00  
Cash   3,000.00

2. On December 1, 2020, HAIKU Corp. gone into right into a 3-month advertisement contract via BRASS Netjob-related and paid $6,000. The company's advertisement will certainly be played 3x a day for 3 months. In the books of HAIKU, the journal entry to record the progressed payment would be:

Dr. Cr.
Prephelp Advertising 6,000.00  
Cash   6,000.00

On December 31, 2020, 1-month worth of proclaiming expense has already been offered up. The adjusting enattempt to document the deliver a component of prepassist heralding to declaring price would certainly be:

Dr. Cr.
Advertising Expense (6,000 x 1/3) 2,000.00  
Prepaid Advertising   2,000.00

Adjusting entries are compelled at the finish of eextremely bookkeeping duration (usually eextremely year). However before, if the firm wants to have more accurate monthly financial statements, then monthly adjusting entries need to be all set.

See more: Pictures Of Pancho Villa And Emiliano Zapata In Mexico, Villa Meets Zapata

Advanced payments may likewise be initially recorded to "Advertising Expense". The adjusting entry later on would certainly then be to move the unoffered part to "Prepassist Advertising". Both methods will certainly create the same result in the accounting mechanism. In any kind of instance, heralding cost should be equal to the offered part, while prepaid cost have to be equal to the unused percentage.