Budget is the financial statement of income and expenditure for a given period of time. Therefore, advertising budget is also a statement of expenditure on various advertising activities and of the income generated from advertising in the same period.
Advertising has a carryover effect that lasts beyond the current period. Although advertising is treated as a current expense, part of it is really an investment that builds up an intangible asset called brand equity.
This treatment of advertising reduces the company‘s reported profit and therefore limits the number of new product launches a company can undertake in any one year.
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