Accounting · Xero

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

Angela Wozniak

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?
Forget about “build it and they will come.” Products without scalable distribution channels will fail to gain traction. Instead of hiring an expensive marketing team, take this course to learn SEO, content marketing, retargeting, viral loops, email marketing, and sales funnel optimization.

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.

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.

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!

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.

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

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.

Gregory Stromberg Founder/CEO cannedwater4kids inc.

June 7th, 2016

Purpose of marketing & advertising is to keep good customers for life & to squire more good customers. I don't see a difference but I would look at each dollar spent as an investment with an ROI. Look & define as a project & project cost with a deliverable. Be careful to define what the purpose is & measure. What are you willing to invest to keep, get more business or acquire more good customers. It all falls under marketing expense. I would use activity based cost accounting. Greg Sent from my iPhone Greg Stromberg www.cannedwater4kids.org

Chicke Fitzgerald

June 8th, 2016

The whole point of finely classifying expenses is to give you decision making information for the future.  

From my perspective, advertising is trackable back to campaigns, so you could track the increase in hits and conversions during the campaign period in relation to your spending and decide whether to spend more or less in the future based on those results.  Marketing is more general and tends to build brand awareness (e.g. going to a tradeshow).  It tracks to general growth in business and you should measure your marketing spending as a percentage of sales.  

I highly recommend that you read Accounting for the Numberphobic by Dawn Fotopulous.  You can also listen to my interview with her on http://www.blogtalkradio.com/solutionzlive/2015/02/13/dawn-fotopulos-a-survival-guide-for-small-business-owners   

Bruce Jackson M&A; private placements; builder of management and financial infrastructures for young companies

June 8th, 2016

Angela, yes, both expenses (marketing and advertising) are operating expenses and fall under the rubric of SG&A expenses, but you'll want / need more detail. Since you're setting up your chart of accounts anew, I encourage you to go ahead and create separate accounts for "Advertising" and for "Marketing." At some point you will want to create management reports that highlight what you've spent on each item. If you lump them together now, you'll ultimately have the annoying task of having to sort them out. Starting now, it's no extra effort to separate those two categories of expense, and this will obviate the need to separately track things in Excel, etc. Good luck, and all the best!