Answer of this question

Journal Entry :

Advertisement Exp (Current Year) A/c Dr.  Rs. 20,000

Advertisement Exp. (Prepaid Exp) A/c Dr.  Rs. XXXXX

                    To Cash / Bank A/c                      Rs. 20,000

(Being advertisement expenses incurded)

Important point to consider during this transaction :

1. Amount involved is Rs. 20,000. Hence to get deduction under Income Tax act 1961, payment shall be made in account payee cheque. Cash payment won't allow you deduction under Act.
2. Matching Concept is to be applied when passing. Only that much expenses should be recorded for current financial year for which corresponding benefits are derived.
3. Advertisement Expenses (Prepaid) is that portion benefits of which will be derived in next financial year(s).

Written on April 16, 2017, 7:28 p.m.