A business partner (supplier) provides marketing funds periodically to our business. It is left to the discretion of our business how these funds are used.
We have been treating these funds as a Balance Sheet item, and marketing expenses are debited to the fund account, thus often leaving a surplus in the fund account.
Should these funds be credited to revenue, and marketing expenses debited to P&L instead?
What if the funds received are non-discretionary, and specific marketing expenses are to be incurred from these? Would a "Balance Sheet" treatment be more appropriate then? Or, even then, both funds and expenses should still be transferred to P&L?
Replies (4)
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Is your "business" a company?
Is your "business" a company? If so where in the balance sheet format are you showing the unspent balance of the fund? Does the company not have a accountant?
Why don't you discuss the options with your existing advisers? Is that not what you pay them for?
But - marketing expenses are expenses and should be in the profit and loss account. The supplier's contribution should be credited to your P&L on a systematic basis, with the uncredited balance at any point in time being included in deferred income.
What the systematic basis for taking credit for the supplier's contribution should be is what you should discuss with your advisers.