The general rule of thumb is 4 to 5% percent of the annual turnover of the business, while this is the general rule and a very good starting point, it is not always relevant.
Let’s say I was car dealer who turned over 10 million dollars a year, I certainly wouldn’t be spending 5% of that on advertising, ($500,000.00) firstly, that’s a lot of money, but in this case there are much better ways to apply advertising budgets.
I could apply a cost to every vehicle I brought into stock, say $200 and artificially increase the cost price, this would show up as undeclared profit after the vehicle was sold, so I would need to journal that $200 to and advertising offset account, the more vehicles I sold, the more that account would accumulate, I could then spend the money from that account on advertising and promotion, your Accountant would need to set this up in your profit and loss statement.
If you are say an Electrician or Plumber, or any other trade or service selling your labour, you can still journal off 5% of each job to an advertising account, this is a very effective way of affording advertising and having accumulated funds to pay for it.