Is Advertising An Expense Or Asset (Investment) In Accounting

What Kind Of Account Is Advertising?

Advertising is considered as an operating expense because it is paid out to produce Revenue in the form of sales of your products or services. It can’not be considered as an Asset or investment because probable future benefits are not sure i.e., sometimes it happens your advertising campaign will be flop and generate very few sales or zero sales and sometimes it gives you so many Sales. For an asset, it must be measurable reliably and provide future probable economic benefits flow to the business. Moreover, the flows of economic benefits are also controlled by that business.

However, an advertising expense paid in advance (Prepaid Advertising Expense) is considered as an asset and reported on the Balance Sheet until the advertising campaign fully complete for the accounting period.

So, we can say that:

Advertising is Considered As Operating Expense normally, but if it meets three below Criteria, then it is considered as an asset or investment. 

(i) The cost of the asset is measurable reliably 

(ii) Economic benefits will flow to the entity

 (iii) The asset is owned and controlled by such entity