Expenses & income · Level: Basics
Journal entry: Advertising costs
Adverts and campaigns are an expense of the period even if they work for longer; input VAT is reclaimed.
Worked example
We pay for an advertising campaign of £850.00 plus 20% VAT by bank transfer.
Correct journal entry
Advertising £850.00, Input VAT £170.00 / Bank £1,020.00
Debit
Advertising£850.00
Input VAT£170.00
Credit
Bank£1,020.00
Why?
- Advertising: expense incurred → debit
- Input VAT: asset increases → debit
- Bank: asset decreases → credit
Calculation
- VAT: 20% of £850.00 = £170.00
- Gross amount: £850.00 + £170.00 = £1,020.00
Typical mistake
Treating advertising as an asset.
Your turn
Three problems on exactly this case, with different numbers. Amounts work with or without separators, e.g. 2,400.00 or 2400.
Transaction
We pay for an advertising campaign of £2,050.00 plus 20% VAT by bank transfer.
Debit
Assets up · expenses · liabilities down
Total debit£0.00
Credit
Liabilities up · income · assets down
Total credit£0.00
Frequently asked questions
What is the journal entry for advertising costs?
Example: Advertising £850.00, Input VAT £170.00 / Bank £1,020.00.
How do I recognise this case?
Adverts and campaigns are an expense of the period even if they work for longer; input VAT is reclaimed.
What is the typical mistake?
Treating advertising as an asset.