What are the Advertising Expenses and its Exceptional Cases ? Are These Capital Expenditures or Revenue Expenses ?

All expenses which are given for advertising or Ads. Every company wants to sell the products or provide his services to customers but problem is that how to increase the sale or customers. Solution can grant by advertising companies. These companies render the services of advertising. So , all expenses which are given for newspaper , TV , Radio , Business card , Yellow card  ads and Online banner for sponsored links are

called advertising expenses . These expenses also include the cost of employee who works for mouth advertising of company. This is selling expenses and will be credited in profit and loss account of company. There are following expenses with this company or enterprise can promote his business or profession but it does not include in advertising expense .

Following are not Advertising Expenses

1. Expense for Wedding ( Personal )

You may not deduct costs as advertising that are primarily personal, even though they may have some promotion value. For example, if your daughter is getting married and you invite some of your best customers to the wedding, you can't deduct the wedding costs.

2. Cost of  Website as Shopping Cart

        If you use your web site for selling your product (having a shopping cart, for example), this is a cost of selling and will not include in advertising cost.

Exceptional Cases of Advertising Expenses

·        Capital Nature Advertising

Some Company have big budget for one year advertising. It may possible that it will be more than 20% of total paid up capital of Company. So, Company can include it as asset.

It will be transferred to profit and loss account over the period of benefit of advertising.

·        Before Running – Prepaid Advertising

If any company paid any amount for advertising before running of ads, then it will be asset and will be shown in balance sheet. If ads are running then it will become as revenue expenditure and will be shown in income statement . Via