karthi sabapathi (student) (173 Points)
31 December 2009Hi, Please expain...
for distribution of goods as sample pieces to customers , we pass the following entry.
Advertisment expenses Dr
To Purchase a/c
why we credit the Purchase a/c? Giving sample means it should be a finished goods, it can not be a raw material.. In this case we have to credit the Stock a/c .
Crediting Purchase a/c means, Purchase raw material and give it as sample.. ? Please explain.
CA Dhiraj Ramchandani
(CA, M. com)
(10823 Points)
Replied 31 December 2009
Rahul
(CA Practice )
(1818 Points)
Replied 31 December 2009
For free samples credit note is issued by customers
vanisri
(Chartered Accountant)
(456 Points)
Replied 31 December 2009
If you credit to sales, it will affect your sales tax also. Better to reduce in stock only.
ROHIT
(ACCOUNTS MANAGER)
(96 Points)
Replied 31 December 2009
| Advertisment expenses Dr | ||||
| To Purchase a/c | ||||
| for example you are soap manufacturer. | ||||
| you will provide sample soap to your customer | ||||
| not the raw-material used in making soap. | ||||
| and soap you gave your customer is not for profit. | ||||
| so purchase account is credited instead of sales. | ||||
| if profit was included it was sales. Because | ||||
| sales=purchases+profit margin | ||||
| if my logic was incorrect please rectify it friends | ||||
venkatesh patil
(Article Assistant)
(27 Points)
Replied 31 December 2009
hey guys then what will be the entry for gifts which the seller will give as free.... like DVD with TV
Vishnu Nair
(Chartered Accountant)
(935 Points)
Replied 31 December 2009
A NEW SITE FOR CA STUDENTS -
Rahul Ramesh
(CA Final, BCom, MBA)
(1084 Points)
Replied 31 December 2009
| Originally posted by : Faiz | ||
 |
I agree with Mr Raj.... |  |
Arun Kumar
(Deputy Manager Assurance)
(230 Points)
Replied 01 January 2010
Hi Karthik,
The sequence of transactions for goods given as free samples is as follows
1. Purchase of Raw materials
Purchases A/c Dr.
To Supplier / Cash / Bank
2. Further Manufacture of Products by incurring additional costs
Wages / Factory Overheads A/c Dr
To Cash / Bank / Wages outstanding
3. Goods Manufactured
Cost of goods produced A/c Dr
To Purchase
To Wages
To Factory OH
4. So for gooods given as sample the entry should be
Advertisement A/c Dr.
To Cost Of Goods Produced
But theoritically speaking we never pass entry no.3 above otherwise than for costing purposes. Hence theoritically the entry will be
Advertisement A/c Dr.
To Purchases
However the net effect will be same. Hope my view is correct. Do send ur suggestions / rectifications
sasmitha
(Practise in Raipur)
(65 Points)
Replied 01 January 2010
arun sir is right .the whole entry is explained in logical manner
Gourav Kapoor
(CA Final Student)
(2977 Points)
Replied 01 January 2010
agree wd both arun sir and raj sir !
Manmohan ACA, CS
(Chartered Accountant )
(14243 Points)
Replied 01 January 2010
| Originally posted by : karthi sabapathi | ||
|
Hi, Please expain... for distribution of goods as sample pieces to customers , we pass the following entry. Advertisment expenses Dr To Purchase a/c why we credit the Purchase a/c? Giving sample means it should be a finished goods, it can not be a raw material.. In this case we have to credit the Stock a/c . Crediting Purchase a/c means, Purchase raw material and give it as sample.. ? Please explain. |
|
I have studied it in CLASS 11
for distribution of goods as sample to customers ,
FOR TRADING CONCERN
Advertisment expenses Dr
To Purchase a/c
FOR MANUFACTURING CONCERN
Advertisment expenses Dr
To Trading A/c
Hope Logic is clear
Landmark Judgments: Important Provisions of the EPF & ESI Act interpreted by the Honorable Supreme Court of India
CAclubindia
