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.
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
| 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 | ||||
hey guys then what will be the entry for gifts which the seller will give as free.... like DVD with TV
A NEW SITE FOR CA STUDENTS -
| Originally posted by : Faiz | ||
 |
I agree with Mr Raj.... |  |
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
CAclubindia
