Question

Why advertisement suspense a/c is a fictitious asset???

Answer 1

Answer:

Explanation:

Advertisement expenses are considered to be of revenue nature. But some times when the expenditure is very heavy and its benefit is likely to be reaped over a period of 2-3 years, then we can capitalize the Advertisement Expenditure. This capitalized Advertisement Expenditure is called Deferred Advertisement Expenditure or 'Advertisement Suspense Account' .This kind of deferred revenue expenditure is written off over a period of 2-3 years (during the period over which the benefit is supposed to be accruing).

Such Deferred Revenue Expenditure is shown in the Balance Sheet as an asset till it is written off to Profit & Loss A/c. Reason for this is very simple. Whenever we make a payment or incur a liability, it is for either buying assets or paying expenses. In both the cases Assets A/c or Expense A/c is debited. From the ledger the debit balance of an asset account will go to the asset side of the Balance Sheet and the debit balance in an expense account will go to the debit side of Trading A/c or Profit & Loss A/c. This is the Purpose of an Advertisement suspense Account.