Is Advertising Expense An Asset, Expense, Or A Liability
What Is Advertising?
Advertising is an effective tactic that small and large businesses use to promote their products, services, or ideas to a specific or targeted audience using different channels such as digital platforms and physical materials.
The main goal of advertising is to convince people to take some action such as buying goods or services or giving awareness about the brand.
Is Advertising Expense An Asset
Advertising expense is not an asset because it is an expense account that reduces the profit. Advertising expense is recorded in the statement of profit and loss in the section of operating expenses. Billboards, website ads, business cards, paid promotions, podcast sponsorship, and radio announcement are examples of advertising expenses.
Why Advertising Is Important For A Business
There are various reasons o why advertising plays a crucial role in business growth. Advertising is an essential tool for a business to make more sales. The following are the major reasons for advertising importance.
- Advertising helps a business to spread brand awareness and availability
- It helps a business to get new customers in a short period
- Advertising a brand shows a unique technique to get more sales by giving awareness and quality of a brand
- It helps a business to show the uniqueness, benefits, and features of its products to the potential customers
- Doing advertising plays a crucial role in building the relationship between customers and market
- Through advertising a business can spread awareness to a specific location or market as per its needs
- Increasing sales through advertising is quite easy
- Advertising helps a business to maintain the customer retention
- Advertising helps a business to know whether they should change or improve their products or services
- Advertising plays an essential role in the expansion of the market, etc.
Advertisement Expense That Can Be Deducted From The Revenue
Following are the expenses that can be deducted from the company’s sales or revenue.
- Television ads
- Radio announcement
- Direct mail ads
- Running newspaper
- Billboard campaign
- Website, website maintenance, and website ads
- Newsletter
- Email messaging
- Promotional items such as cups, t-shirts, and mags, etc.
FAQs
Can you capitalize on advertising expenses?
Advertising is normally used for brand awareness and product marketing, so it should not be capitalized.
What type of account is an advertising account?
An advertising account is an expense account.
Is advertising expense a fixed asset?
No, it is an expense account.
Is advertising expense in a balance sheet?
No, advertising expense is recorded in the statement of profit and loss.
Is advertising expense a selling expense or a marketing expense?
Advertising is a marketing expense and not a selling expense. A selling expense includes logistics, shipping, and insurance costs.