Free Sample Adjustment in Final Accounts

Arjun EP

Published on: July 5, 2020

Adjustments given below trial balance must be adjusted for final account.

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 in Final Accounts

Closing stock

Outstanding expenses

Prepaid expenses

Accrued income or income receivable

Advance income or unearned income

Depreciation on assets

Appreciation on assets

Written off or amortized

Purchase or sale of fixed assets

Bad debts, provision and discount

Bad debts recovered

Goods loss by fire and insurance claim

Goods distribute as free sample

Manager’s commission

Bonus or pension to employees

Create reserve or fund

Goods sold on sale or return basis

Hidden adjustment:

(a) Interest on loan or debenture

(b) Interest on investment

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: 13

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

Amount

Free sample (advertisement) account

To Purchase account

(Being- goods distributed as free sample)

10,000

Trading Account

Particulars

Amount