Received A Bill For Advertising Journal Entry

When the sole proprietor or the company / corporation received a bill for advertising from advertising company, then it creates a Liability for the sole owner or the corporation or the company to pay for advertising expense payable by the sole proprietor or the company or the corporation to the advertising company.

The journal entry is shown below:

                                                    Advertising Expense a/c  XXX

 

                                                                                                             Accounts Payable a/c  XXX

 

                                                        (Received Bill For Advertising Expense From Advertising Agency)

Example: Mr. A is a sole proprietor in his own business. He received a bill from advertising expense of Rs. 10000 forr advertising made during the period. What is the journal entry of receiving a bill of Rs. 10000 and the effect of this transaction on the accounting equation?

                                                           Adverttising Expense a/c  10000

 

                                                                                                                 Accounts Payable a/c  10000

 

                                                                   (Received A Bill For Advertising Expense)

The Effect Of Received Bill For Advertising Expense On The Accounting Equation

                                             Assets          =             Liabilities              +          Owner’s Equity

                                                  0               =    +Accounts Payable       +      (-Advertising Expense)

                                                  0               =            +(10000)                 +                 (-1000)

Accounts Payable as a Current Liability is increasing, so it is added to liabilities on the right side of the accounting equation while advertising expense is the result of operating activities of the owner (Mr. A) of the business and it is incurred to earn revenue for the business, so it is increasing and it is deducted from owner’s equity. No changes will be made on the left side of the accounting equation. At the end, the accounting equation remains in balance.