Journal Entry for Goods Given as Charity or Distributed as Free Samples

Charity generally refers to the voluntary giving of help, typically, in the form of money or goods to those in need. Goods given as free samples are, however, a way of advertising. Both acts, when performed by a company, are required to be recorded in the books of accounts.

Goods given to charity or goods distributed as free samples are not to be accounted as sales. Instead, they are accounted as expenses, simply because, in this case, the outflow of goods happen without any consideration.

 

Journal Entry for Goods Given as Charity

When accounting for goods given as charity, the purchases are reduced with the exact cost of goods contributed.

 Charity A/C  Debit
   To Purchases A/C  Credit

 

Example

A company Unreal Pvt Ltd. gave goods in charity which costed them 20,000. Journal entry for charity in this case will be

 Charity A/C  20,000
   To Purchases A/C  20,000

 


 

Journal Entry for Goods Distributed as Free Samples

When accounting for goods distributed as free samples the purchases are credited and the advertisement account is debited.

 Advertisement A/C  Debit
   To Purchases A/C  Credit

 

Example

A company Unreal Pvt Ltd. distributed goods as free samples, which cost 15,000 to the company. A journal entry for goods distributed as free samples will be

 Advertisement A/C  15,000
   To Purchases A/C  15,000