It comes in debit side of p&l a/C and also come assets side in balance sheet

Effects of Writing off Advertisement by Rs. 400 in Final Accounts

Introduction:
In accounting, the process of writing off an advertisement expense of Rs. 400 from the final accounts can have several effects on the financial statements. These effects primarily impact the income statement and the balance sheet. Let's discuss each of these effects in detail.

1. Income Statement:
The income statement reflects the financial performance of a company over a specific period. Writing off an advertisement expense of Rs. 400 will affect the following items on the income statement:

- Operating Expenses: The advertisement expense of Rs. 400 will be subtracted from the total operating expenses, reducing the net income for the period.

- Net Income: As a result of reducing the operating expenses, the net income figure will decrease by Rs. 400.

2. Balance Sheet:
The balance sheet provides a snapshot of a company's financial position at a specific date. Writing off the advertisement expense will affect the following items on the balance sheet:

- Retained Earnings: The net income reduction of Rs. 400 will directly reduce the retained earnings in the equity section of the balance sheet.

- Current Assets: If the advertisement expense was initially recorded as a current asset, such as prepaid advertising, the write-off will decrease the value of current assets by Rs. 400.

- Working Capital: As a result of the decrease in current assets, the working capital (current assets minus current liabilities) will also decrease by Rs. 400.

- Owner's Equity: The decrease in retained earnings will reduce the owner's equity by the same amount, affecting the overall value of the company.

Conclusion:
Writing off an advertisement expense of Rs. 400 will have a direct impact on the income statement and balance sheet. The income statement will show a decrease in operating expenses and net income, while the balance sheet will reflect a decrease in retained earnings, current assets, working capital, and owner's equity. It is essential for businesses to accurately record and account for expenses to provide a true and fair view of their financial position.