what is the logic in the entry

Dear Sabapathi,

for converting Raw material to finished goods we pass stock journal voucher. even after converting raw material to finished goods, we will disclosed in purchases as finished goods products with conversion cost.

after passing the entry, we reduce the stock from the stock register.

Regards,

Ravi

purchase is credit only to reduce stock and we cant credit sale because sale includes margin but by giving good as a sample we are not earning antyhing.

First thing to note about this entry is what would be the impact on cost of goods sold. when the goods are distributed as free sample whether as raw material or as finished goods they should be treated as part of cost of goods sold i.e (opening stock + purchase + direct expenses - closing stock - goods distributed as free sample). . if u credit the purchase or credit the stock or just show the free sample in the credit side of Trading A/C the impact will be the same....so this is the presentation which differs...we conventionally credit the purchase a/c...insted if we credit the stock a/c or Trading a/c and i think the same should be equally acceptable...

Creditng Purchases is a far superior option then cerditng sales...

yup i'll agree wid RAJ he is right....

Free Samples Does Not Include Your Profit Element hence the Purchases amount is Credited insted of Sales as Therefore Instaed of Purchases expenses it is hsown as an advertisement expenses By

 Dr. Advertisement and

 Cr The Purchases.

Manmohanji is righ.  

In case a company is carrying on manufacturing, then it will be better if it maintains Manufacturing A/c as well as Trading A/c.  In case raw material is distributed as sample, then entry should be Free Sample A/c  Dr. to Manufacturing A/c/Purchases with cost of purchases amount.

But if finished goods are distributed as samples, then entry should be Sample A/c Dr. To Trading A/c at Cost of Sales.

Dear All,

The Client gives 5 Laptops at free of cost to the company. How it has to be accounted in the books of the recipient of the gift.

Though the value of 5 laptops is a gain to the firm, it can not be treated as revenue profit, as we will also not like to enhance our income and pay tax on it.  The best alternative I can think is:

Office Equipment A/c (Laptops) A/c Dr.

   To Capital Reserve A/c

Though the value of 5 laptops is a gain to the firm, it can not be treated as revenue profit, as we will also not like to enhance our income and pay tax on it.  The best alternative I can think of is:

Office Equipment A/c (Laptops) A/c Dr.

   To Capital Reserve A/c