For business promotion, company distributes free samples to customers.
Free distributed is promotion or advertisement.
To know the taste and/or quality, free samples are distributed.
It provides information to management to improve the quality of the product.
Sometimes, organization can provide goods for charity, religious purpose and social service (flood affected, tsunami, earthquake etc).
When goods are distributed as free samples or charity, it is deducted from purchase goods because it decreases purchased goods.
Goods Given or Distributed
Free sample (advertisement) account |
Dr |
Goods distributed as free sample |
Increase in expenses |
Charity account |
Dr |
Goods given as charity |
Increase in expenses |
To Purchase account |
|
Value of goods |
Decrease in assets |
(Being- goods distributed or given as…) |
|
|
|
Journal Entry
In the book of …………
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
|
Free sample (advertisement) account |
Dr |
|
xxxx |
|
|
Charity account |
Dr |
|
xxxx |
|
|
To Purchase account |
|
|
|
xxxx |
|
(Being- goods distributed or given as ………) |
|
|
|
|
|
|
|
|
|
|
#######
Click on link for YouTube videos topic wise : |
|
Accounting Equation |
|
Basic Journal Entries in Nepali |
|
Basic Journal Entries |
|
Journal Entry and Ledger |
|
Ledger Account |
|
Subsidiary Book |
|
Cash Book |
|
Trial Balance and Adjusted Trial Balance |
|
Bank Reconciliation Statement (BRS) |
|
Depreciation |
|
Click on link for YouTube videos chapter wise: |
|
Financial Accounting and Analysis (All videos) |
|
Accounting Process |
|
Accounting for Long Lived Assets |
|
Analysis of Financial Statement |
#####
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
PROBLEM: 18
SL Traders has following extracted transactions:
Goods worth Rs 15,000 are given as charity.
Goods distributed as free sample Rs 20,000.
Goods worth Rs 2,500 given free of cost to friend
Goods worth Rs 4,000 given to construction of temple.
Required: Journal entries
SOLUTION:
Journal Entry for American Style
Date |
|
|
Debit $ |
Credit $ |
(a) |
Charity account |
|
15,000 |
|
|
Purchase account |
|
|
15,000 |
|
To record goods given as charity |
|
|
|
|
|
|
|
|
Journal Entry for European Style
Date |
|
|
|
€ |
€ |
(a) |
Charity account |
Dr |
|
15,000 |
|
|
Purchase account |
|
|
|
15,000 |
|
To record goods given as charity |
|
|
|
|
|
|
|
|
|
|
Journal Entries
In the book of SL Traders
Date |
Particulars |
|
LF |
Amount Dr |
Amount Cr |
a |
Charity account |
Dr |
|
15,000 |
|
|
To Purchase account |
|
|
|
15,000 |
|
(Being- goods given as charity) |
|
|
|
|
b |
Free sample (advertisement) account |
Dr |
|
20,000 |
|
|
To Purchase account |
|
|
|
20,000 |
|
(Being- goods distributes as free sample) |
|
|
|
|
c |
Drawings account |
Dr |
|
2,500 |
|
|
To Purchase account |
|
|
|
2,500 |
|
(Being- goods given to friend free of cost) |
|
|
|
|
d |
Charity account |
Dr |
|
4,000 |
|
|
To Purchase account |
|
|
|
4,000 |
|
(Being- goods given as to temple construction) |
|
|
|
|
|
|
|
|
|
|
###########
PROBLEMS AND ANSWERS |
Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Currency of your country
Basic Problem: 18 Free Sample, Goods Distributed
SK Traders has following extracted transactions:
Goods worth Rs 5,000 are given as charity.
Goods distributed as free sample Rs 10,000.
Goods worth Rs 1,000 given free of cost to friend
Goods worth Rs 5,000 given to construction of temple.
Required: Journal entries
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