Journal Entry: Goods Distributed as Free Sample

Arjun EP

Published on: September 29, 2020

How to make journal entry for free sample, goods distributed as free sample

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	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

#####

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)