Promotion expense definition
/What is Promotion Expense?
Promotion expense is the cost incurred by a business to publicize its products to customers. The types of activities that are classified as promotion expense include advertising, direct marketing, sales promotions, and trade shows. The intent behind incurring this expense is to eventually increase sales.
How to Account for Promotion Expense
The various types of promotion expenses are usually classified as a marketing expense. It may also be classified as a sales expense, if the business does not break out marketing expenses in its income statement. These expenses may be recorded within a single Promotion Expense account, or they may be recorded within a number of sub-classifications, such as Advertising Expense, Direct Marketing Expense, Sales Promotions Expense, and Trade Shows Expense.
Is Promotion Expense Tax-Deductible?
Promotion expense is a valid tax-deductible expense on an organization's tax return. Be sure to maintain a detailed record of these expenses, to provide proof in case you are audited. Otherwise, there is a risk that the expense will be disallowed, which will increase your income tax due.
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Examples of Promotion Expenses
Examples of promotions are handing out free product samples or offering a free snow removal to the consuming public. Or, a baker may hand out a free donut on a particular holiday, in order to attract new customers.