Advertising expense definition
/What is Advertising Expense?
Advertising expense is a general ledger account in which is stored the consumed amount of advertising costs . The balance in this account is reset to zero at the end of each fiscal year , so that it can be populated in the next year with new advertising expenses.
Classification of Advertising Expense
Advertising expense is classified as an operating expense . It is not part of the cost of goods sold . If a company pays advertising fees in advance, these fees are first recorded as a prepaid expense , which is a current asset . Then, when the related advertising activities occur, these funds are shifted over to the advertising expense account, resulting in their recognition as an expense .
Presentation of Advertising Expense
The periodic amount of advertising expense is reported within the selling, general and administrative expenses section of the income statement . If a business decides to only report expenses in aggregate for specific departments, then advertising expense would be included in the Marketing Department line item.