what is the logic in the entry

For free samples credit note is issued by customers

If you credit to sales, it will affect your sales tax also. Better to reduce in stock only.

thanks for all

hey guys then what will be the entry for gifts which the seller will give as free.... like DVD with TV

I agree with Mr Raj....

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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

i agery with Mr. Raj

arun sir is right .the whole entry is explained in logical manner

 agree wd both arun sir and raj sir ! 

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