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What is journal entry for goods distributed as free samples ? Is it advertisement a/c. Dr To purchase a/c or marketing a/c. Dr To purchase a/c?
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What is journal entry for goods distributed as free samples ? Is it ad...
Journal Entry for Goods Distributed as Free Samples
When a company distributes goods as free samples, it is a marketing strategy to promote the product and attract customers. The journal entry for such transactions is as follows:
Option 1: Advertising A/c Dr To Purchase A/c
- Debit the Advertising Account: The cost of the product distributed as free samples is recorded as an expense in the advertising account.
- Credit the Purchase Account: The cost of the product is credited to the purchase account, reducing the inventory balance.
This option is appropriate when the company wants to record the cost of the free samples as an advertising expense.
Option 2: Marketing A/c Dr To Purchase A/c
- Debit the Marketing Account: The cost of the product distributed as free samples is recorded as an expense in the marketing account.
- Credit the Purchase Account: The cost of the product is credited to the purchase account, reducing the inventory balance.
This option is appropriate when the company wants to record the cost of the free samples as a marketing expense.
Explanation
The distribution of free samples is a marketing strategy that aims to increase the visibility of the product and attract customers. The cost of the product distributed as free samples is recorded as an expense in the advertising or marketing account, depending on the company's preference. The purchase account is credited to reduce the inventory balance since the product is no longer available for sale.
It is important to note that the distribution of free samples can also have tax implications, and companies should consult with their accountants to ensure compliance with tax laws.
Community Answer
What is journal entry for goods distributed as free samples ? Is it ad...
Advertisement a/c Dr.
TO purchases a/c.
bcoz goods are used for advertisement purpose
TO purchases a/c.
bcoz goods are used for advertisement purpose
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What is journal entry for goods distributed as free samples ? Is it advertisement a/c. Dr To purchase a/c or marketing a/c. Dr To purchase a/c?
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