Goods given as charity 5,000 journal entry?

Question

Answer

Journal Entry

When goods are given as charity, charity account is debited and purchases account is credited. The journal entry is given below:

Example

On April 20, 2016, the Metro Trading Company gives away merchandise amounting to $350 to a charitable institution.

Required: How would the company record above transaction in its general journal?

Solution

Answer

Charity a/c.        Dr.    5000        To purchases a/c.      5000

Answer

Charity ac dr.   ..... to purchase

Answer

Charity a/c dr. 5000 to putchase/ inventory a/c 5000

Answer

Goods worth Rs 5000 given as charity

Answer

Charity ac.  dr.        to purchases. ac.

Answer

Goods Given as Charity - Journal Entry

When a business donates goods as charity, it is important to record this transaction in the accounting records. This allows for proper documentation and tracking of the charitable contributions. The journal entry to record goods given as charity involves debiting the 'Charitable Contributions' expense account and crediting the appropriate inventory account.

Step-by-Step Explanation:

Identify the Nature of the Goods: Determine the type of goods that are being donated. This could range from inventory items to supplies or other assets.

Determine the Fair Value: Assess the fair value of the goods being donated. This is the amount that the goods could be sold for in their current condition.

Create the Journal Entry: Prepare the journal entry to record the donation:

Journal Entry:

Account	Debit	Credit
Charitable Contributions	XXXX
Inventory		XXXX

Explanation:

Charitable Contributions: Debit the 'Charitable Contributions' expense account for the fair value of the goods donated. This represents the amount of the donation and will be reported as an expense on the income statement.

Inventory: Credit the appropriate inventory account to reduce the quantity and value of the goods in inventory. This recognizes the fact that the goods have been donated and are no longer available for sale.

It is important to consult with a professional accountant or tax advisor to ensure compliance with any specific regulations or reporting requirements related to charitable contributions. Additionally, proper documentation, such as receipts or acknowledgment letters from the charitable organization, should be maintained for audit and tax purposes.

By properly recording goods given as charity, businesses can accurately reflect their contribution to the community and receive any applicable tax benefits.

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