Advertisement Suspense Account

An advertisement suspense account is a type of account that is used to record the potential liability for advertising expenses that have not yet been invoiced or received. This account is generally used by companies that engage in advertising campaigns and need to account for the expenses associated with those campaigns.

How it Works

The advertisement suspense account is set up as a liability account on the balance sheet. As advertising expenses are incurred, they are recorded in this account, but not yet recorded as an expense on the income statement since the invoice has not been received. Once the invoice is received, the expense is recognized and the liability is removed from the advertisement suspense account.

Why it is Used

The advertisement suspense account is used to ensure that a company accurately records its advertising expenses. By recording these expenses in a separate account, a company can keep track of the amount of money it owes for advertising and avoid overpaying or underpaying for these expenses.

Example

Let's say that a company runs an advertising campaign for a new product. The total cost of the campaign is $10,000, but the invoice has not yet been received. The company records this expense in the advertisement suspense account as a liability. Once the invoice is received, the expense is recognized and the liability is removed from the advertisement suspense account.

In conclusion, the advertisement suspense account is a useful tool for companies to track their advertising expenses and ensure that they accurately record these expenses. By using this account, companies can avoid overpaying or underpaying for advertising expenses and ensure that their financial statements are accurate.