Accounting · Xero

What is the difference between advertising and marketing from an accounting perspective?

Angela W UX / UI Designer looking for a co-founding opportunity

June 7th, 2016

I am doing my bookeeping and I have two accounts in xero. One for marketing and one for advertising. When I am logging my expenses like facebook ads or paying a VA to write a blog post or giving away products to a style influencer where do they go? Is there a clear between what is an advertising expense and what is a marketing expense for the purposes of accounting? And whay would I want to separate the two?

Ava Kohl Founder at Element15

June 7th, 2016

Hi Angela, 

Paul O'Brien is incorrect in saying that Advertising should be classified as a CapEx.  Marketing and Advertising should both be classified into just one category. 

I hired a great CFO where they also do basic bookkeeping.  I can refer you to them if you like.  I get a nice bonus by referring you and you get a break on your plan.  

I use MyBooks.Solutions.  I know they are not using the traditional domains but it's https://www.mybooks.solutions.  

They helped me immensely sorting out my books. 

Good luck, Angela!

Ava Kohl Founder at Element15

June 7th, 2016

It is still incorrect either way you slice it.  CapEx is something that you know will spend and will be depreciated overtime.  Explain to how are you going to depreciated Advertising? We'd love to know. :DD

Hassan BMath Associate Corporate Finance at Tricon Capital Group Inc.

June 8th, 2016

Both expenses are the same. You can use either categories from a tax perspective. 


Paul MBA Providing CFO services at a Client of Interworks Group LLC

June 8th, 2016

Hi Angela - This is a great question. If you do not have a lot of marketing and advertising expenses, simply use one account. Keep it simple and call it Marketing & Advertising.

There are two main reasons for separating these two expenses - 1) they are significant expenses and it would be best to break them out or 2) you need more detailed information to help you make decisions.


For instance, if you are running ad campaigns and want to understand the return on investment on your ads, this could be a reason to separate advertising versus marketing if you need the transparency.

Angela Giglia Award-Winning Creative Idea Person | Communicator | Revenue Spotter | Human Connector | Digital Media Producer

June 8th, 2016

HI Angela, I keep my advertising and marketing all in one category because both are about promoting your business and the 2 are connected. My accountant puts them all under business expenses so separating them just takes up additional time.

Jeff Gartner Marketing and Community Researcher

June 8th, 2016

For tax purposes it doesn't matter, they'll be eventually combined. But for planning and tracking your decisions, you should at least separate them in a spreadsheet. Marketing is a lot more than just advertising, as it also includes all your product, pricing, distribution and marketing research plans.

Traditionally, Advertising is part of the Promotion (or Marketing Communications) subset of Marketing. Along with Advertising, other elements of Promotion/Marketing Communications include Public Relations (and that can include Social Media), Sales Promotion, and other sales expenses.

Darrel Raynor Project & Ops Turnarounds, Interim CIO/COO, improve performance of dept or teams. Speaker, Trainer, Consultant, Staffing

June 8th, 2016

So, as a recovering accountant/finance person, here is how we do it for our firm and our customers...

Advertising and Marketing is the main summary account. For tax purposes, it is all expense, no capitalizable except in rare cases.

You can have as many sub-accounts as you like and call them whatever you wish that will help you run your business under that main account. Always make sure your sub-accounts roll directly up into an account that the IRS wants to see -- most have specific names, and your tax time will be much cheaper and easier.

Paul O'Brien

June 7th, 2016

Technically yes, marketing and advertising are drastically different and the mistake most businesses and startups make is considering them the same. Advertising is a way of promoting one's business. It's a an expense in the sense of a budgeted cost akin to Capex. That capital expenditure is the appropriate way to think about advertising because Marketing really should be though of as Opex. Now, don't quote me on that from an Accounting standpoint, I'm sharing a philosophical one. Marketing is a practice. Any business in operation is by way of doing business marketing. It's the practice of the market in the same sense that your practice is the accounting; sure, it's something companies can avoid or just not do but I'm sure you'd agree that any company that fails to do the work you do is doomed... same is true of Marketing. So what are the marketing related investments (note that I'm not calling them costs)? Customer service, design, sales, research, analytics, and martech (Marketing platform) licenses are all ongoing marketing investments. They're things that most businesses wouldn't disregard unless they just don't care about their success, and yet many businesses won't invest in "marketing" because it has been perverted into being considered just advertising, growth, etc. Marketing is how a company knows IF, how, where, and why to advertise. Whether or not it does is a budget line item. Thus marketing also then determines if and how, instead of advertising, a business might pay for commercials, trade shows, content, lead gen, etc. Famed economist Peter Drucker once said, paraphasing, that the only two things that create value in business are innovation and marketing, and that marketing was the distinguishing of the two. He wasn't talking about advertising.

Paul O'Brien

June 7th, 2016

I didn't say it should be classified that way ;) in fact, I said I wasn't commenting on how to account for it, merely how to think about why it's different from Advertising

Frank Intiso Professor-Business at California State University

June 7th, 2016

Hi Angela
Both marketing and advertising are expenses from an accounting point of view and are expenses at time you incur these costs. 

As far as setting up two accounts or just combining them the answer would depend on your business and how much money you will be spending on these two types of expenses. 

Also it would depend on how you establish your budget.  Without knowing more information about your business and plans I would suggest setting up two accounts.  If you do not find that this is helpful to you, then you can combine at a later date