Prepaid Advertising

Definition: Advertising paid before ads run

Scope:NarrowDifficulty:Very Easy

Advertising paid before ads run

Common Journal Entries
AccountDebitCredit
1. Pay for 6-month campaign
Pay $4,800 for advertising campaign.
Prepaid AdvertisingAsset+$4,800
CashAsset−$4,800
Asset created; benefit over 6 months.
2. Monthly adjusting entry
$4,800 / 6 = $800 per month.
Advertising ExpenseExpense+$800
Prepaid AdvertisingAsset−$800
Expense recognized as ads run.

T-AccountsA visual representation of a ledger account shaped like the letter T. Left side shows debits, right side shows credits.

Prepaid AdvertisingPrepaid AdvertisingAssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$4,800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$800.00
$4,000.00
CashAsset account. Debits increase the balance. Credits decrease the balance.AssetA resource owned by the business. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$4,800.00
$4,800.00
Advertising ExpenseAdvertising ExpenseExpenseA cost incurred in the process of earning revenue. Normal balance: debit. Debits increase, credits decrease.
DebitLeft side of a journal entry. Increases assets and expenses. Decreases liabilities, equity, and revenue.
$800.00
◀ Normal bal.
CreditRight side of a journal entry. Increases liabilities, equity, and revenue. Decreases assets and expenses.
$800.00
DurationShort-Term

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