Adjustments in Final Accounts: Free Sample

Arjun EP

Published on: September 26, 2020

Adjustments in Final Accounts

Adjustment entry means not adjusted while preparing trial balance.

It is also known additional information.

Almost all the adjustment entry effects dual aspect.

One is debit and other is credit.

There are a number of adjustments to be made while finalizing the financial statements.

But our discussion will be limited to the following adjustments (limited by the curriculum):

MAJOR ADJUSTMENTS OF FINAL ACCOUNTS:

1	Dividend	13	Bad debts, provision and discount
2	Transfer to reserve and fund	14	Recovery of bad debts
3	Adjustment of tax	15	Goods loss by fire and insurance claim
4	Closing stock	16	Goods distribute as free sample
5	Outstanding expenses	17	Manager’s commission
6	Prepaid expenses	18	Bonus or pension to employees
7	Accrued revenue or income	19	Create reserve or fund
8	Unearned or prepaid revenue	20	Goods sold on sale or return basis
9	Depreciation on assets	21	Hidden adjustment:
10	Appreciation on assets		(a) Interest on loan or debenture
11	Written off or amortized		(b) Interest on investment
12	Purchase or sale of fixed assets		(c) Monthly rent and salary

Goods Distribution as Free Sample

A company can distribute some goods as free samples to the customers to promotion of business.

Free sample of products is distributed for getting feedback about taste and quality from the customers.

It provides information to the management of company to improve quality of product.

Sometimes organization can give goods as charity or donation for religious purpose, and social help (help at the time of floods, tsunami, earthquake etc).

Goods given as free sample, charity or donation is deducted from purchase of goods because it decreases purchase goods.

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු =

ADJUSTMENT: 16A

ABC Manufacturing Company purchased goods worth $/₹/Rs 800,000 for the year. Out of them, product worth Rs 10,000 distributed as free sample during the year.

Required: Adjustment entry and ledgers

Journal Entries

Date	Particulars		LF	Amount	Amount
	Free sample (advertisement) account	Dr		10,000
	To Purchase account				10,000
	(Being- goods distributed as free sample)

Trading Account

Particulars		Amount	Particulars	Amount
To Purchase	800,000
Less: Free sample	(10,000)	790,000

Profit and Loss Account

Particulars	Amount	Particulars	Amount
To Free sample (advertisement)	10,000

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