Is debiting "Drawings A/c" for Goods distributed as Free samples is the Correct treatment ???
Plz Answer ???
Saumya Ranjan Nandy (B.Com) (35 Points)
25 October 2012Is debiting "Drawings A/c" for Goods distributed as Free samples is the Correct treatment ???
Plz Answer ???
Yash Gokani
(Article Assistant)
(47 Points)
Replied 25 October 2012
Pakshal Shah
(Practicing Chartered Accountant)
(271 Points)
Replied 26 October 2012
CA Pooja Agarwal
(Chartered Accountant)
(3228 Points)
Replied 26 October 2012
no it is not a correct treatment..."distibuted as free sample" is a business connotation ..it is done for promotional purposes and should be classified as advertisemnet/promotional expenditure.
hence purchase a/c or stock a/c should be credited and adv expenses should be debited
Komal Sharma
(Assistant Accountant)
(1887 Points)
Replied 26 October 2012
No it's not a correct treatment because you are distributing goods as free sample and for this you have debit your Advertisement or Business Promotion Expenses and credit your Purchase or Stock A/c, not Drwaings A/c. Drawings A/c is a Capital A/c and you can use it when Proprieter takes away the goods from business but remeber that goods are not for free sample.
Komal Sharma
(Assistant Accountant)
(1887 Points)
Replied 26 October 2012
And when you are distributing goods as free sample than it doesn't matter that who takes that goods Proprieter or other public, you are just doing your advertisement or Promotion.
CA Ram
(CA)
(310 Points)
Replied 26 October 2012
no it is not a correct treatment..."distibuted as free sample" is a business connotation ..it is done for promotional purposes and should be classified as advertisemnet/promotional expenditure. hence purchase a/c or stock a/c should be credited and adv expenses should be debited
CA. JAIN
(Chartered Accountant)
(466 Points)
Replied 26 October 2012
Agree with pooja... Advertisement exps. a/c Dr. To Purchase a/c But i want to ask what is stock a/c.....in my view no stock account are open..bec it doesnt comes in tb. bal of c/s is come from stock register or valuation which ever is less......only opening stockledger account is open at start of the year and that caome same in trading account......
CA Tarachand kumawat
(Partner)
(23 Points)
Replied 27 October 2012
If goods are distributed as free sample in connection of business then it will be treted as reduction in purchases rather then Drawings but if goods are withdrawl by owner for personal use then it will be treted as Drawings
CA Tarachand kumawat
(Partner)
(23 Points)
Replied 27 October 2012
If goods are distributed as free sample in connection of business then it will be treted as reduction in purchases rather then Drawings but if goods are withdrawl by owner for personal use then it will be treted as Drawings
CA. JAIN
(Chartered Accountant)
(466 Points)
Replied 27 October 2012
| Originally posted by : CA Tarachand kumawat | ||
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If goods are distributed as free sample in connection of business then it will be treted as reduction in purchases rather then Drawings but if goods are withdrawl by owner for personal use then it will be treted as Drawings |
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I think in both situation:
purchase will reduce: by crediting purchase account
entry will be as follow:
1.Drawings/Free sample account Dr.
To purchase account
2. Capital Account Dr.
To drawings
or
P&l Account Dr.
To free sample account
Uma
(Student)
(158 Points)
Replied 28 October 2012
Mr.JAIN
In my view, If you distibute free sample from purchased goods, you will credit purchase a/c.
Or, if you done some promotional activities for purchased goods(raw material to next stage), you will credit the stock a/c, here purchased goods value is increased.
CA. JAIN
(Chartered Accountant)
(466 Points)
Replied 28 October 2012
| Originally posted by : Umavalli | ||
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Mr.JAIN In my view, If you distibute free sample from purchased goods, you will credit purchase a/c. Or, if you done some promotional activities for purchased goods(raw material to next stage), you will credit the stock a/c, here purchased goods value is increased. |
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I think u r talking about costing records....but we are disscussing about financial/main books of accounts....in my opinion there is no entry is gothrough from stock account.....the simple treatment is to reduce purchase..
CAclubindia
