what is free samples in accounting. and what are the effects in accounting and why. Plz if anybody can explain.
Answers
Hello there!
Free samples is just an advertisement in Accounting. Free sample leads to expenses. If there are somewhere written as free samples , u ll have to considered as Advertisement.
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 for 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, purchases are reduced with the exact cost of goods contributed.