Question

goods costing rupees 500 distributed as a free sample

Answer 1

Explanation:

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ANSWER

When goods are purchased or brought into the business purchase account is debited. Similarly when goods go out of the business for any reason other than sales, purchases account is credited.

The journal for goods distributed as free samples is -

Advertisement Expense A/c Dr. 10000

To Purchases A/c 10000

Here sales account is wrongly credited instead of purchases account, so the incorrect entry has to be cancelled and actual entry has to be passed. Here Advertisement Expense account is rightly debited, so no changes will be made to it.

Since sales account is wrongly credited, it will be debited to cancel the entry and purchases account will be credited which was omitted. The rectification entry is -

Sales A/c Dr 10000

To Purchases A/c 10000