065 Advertising

Expenses

Semi-Fixed

Synopsis

The cost of advertising purchased directly by the dealership is recorded in Account 065, Advertising.

Debits

Credits

The cost of all Advertising, including various media such as Newspaper, TV, Radio, Direct Mail, etc. directly related to the sales promotion of:

a. New Vehicles

b. Used Vehicles

c. Fleet Sales

d. Service Labor

e. Parts

f. Body Shop repairs

Local Advertising & Marketing (LAM) charges as designated on factory vehicle invoices
The monthly provision for long term ads such as:

a. Yellow Pages

b. Billboards

c. Other permanent advertising

The cost of sponsorships of:

a. Local clubs & civic organizations

b. School, community or Youth activities such as:

i. Little league teams

ii. Soccer teams

iii. Bowling leagues

Promotional give away items such as:

a. License plate frames

b. Key fobs

c. Coffee cups

d. Tee shirts

e. Caps & visors

Other promotional items such as:

a. Banners & pennants

b. Balloons

c. Special displays

Example 1

Record the $675 monthly expense of key fobs and license plates given to new and used vehicle customers. The $675 is distributed to the New Vehicles Department and the Used Vehicles Department based on usage as shown in the example below.

Journal: Standard Entries Journal

Entry:		Debit	Credit
Account 065-01	Advertising – New Vehicles Department	$450
Account 065-02	Advertising – Used Vehicles Department	$225
Account 274	Prepaid Expense		$675

Example 2

Record the current months invoice in the amount of $20,000 for advertising on the radio. The $20,000 is distributed to each department that advertised as shown in the example below.

Journal: Cash Disbursements and Purchase

Entry:		Debit	Credit
Account 065-01	Advertising – New Vehicles Department	$12,000
Account 065-02	Advertising – Used Vehicles Department	$5,000
Account 065-03	Advertising – Lease & Rental Department	$3,000
Account 300	Accounts Payable Trade Creditors		$20,000

Example 3

Record the factory invoice of $17,043 for the purchase of a new car from the manufacturer. The new car inventory value is $16,168, the Holdback is $525, Co-op Advertising is $175 and New Vehicle Advertising expense is $175.

Journal: New Vehicle Purchase

Entry:		Debit	Credit
Account 231	Inventory – New Cars	$16,168
Account 261	Factory Receivables – Holdback	$525
Account 261	Factory Receivables – Co-op Advertising	$175
Account 065-01	Advertising Expense – New Vehicles Department	$175
Account 310	Notes Payable – New Vehicle & Demos		$17,043

Distribution of Expenses

065 Advertising	New Veh.	Used Veh.	Lease & Rental	Mechanical	Body Shop	Parts & Access.	Gen & Admin.
	01	02	03	05	06	07	09
Advertising billed on factory vehicle invoices	Total expense
Media Advertising	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Dealership advertised
Direct mail Advertising including postage	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Dealership advertised
Telephone directory and other general-type Advertisements							Total expense
Free lubrications				Total expense
Sponsorship of teams							Total expense
New vehicle showroom window posters	Total expense
Sales promotions materials (handouts, brochures, etc.)	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Dealership advertised
Road signs	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Department advertised	Dealership advertised
Auto shows	Total expense
Banners for used car lot		Total expense
Promotional items (key-rings, windshield scrapers, etc.)	Usage	Usage	Usage	Usage	Usage	Usage	Usage

Comments

Advertising is one the dealerships biggest controllable expenses. A budget should be prepared for each months expenditures. Periodic reviews of overall Advertising should be conducted in order to maximize the effectiveness of the money spent. Also, some of the least expensive advertising can produce the best long-term results. Sponsorship of local organizations in surrounding communities often brings in the best customers community leaders.