Usually,when goods are given for charity,the entry is
Donation ac. Dr
To Purchases
Why can't we just credit inventory?
Replies (4)
Quick Summary
This discussion questions the standard accounting practice of debiting a 'Donations' account and crediting 'Purchases' when goods are given to charity. The original poster suggests crediting 'Inventory' directly instead, arguing it would better reflect the movement of stock and allow for clearer reporting of losses. Other participants explain that the current method is standard to avoid impacting Gross Profit Margin and other GAAP measures, as crediting inventory would effectively remove it from the cost of goods sold calculation.
There is no other way. Only closing inventory like above is used in profit statement. I'm just wondering myself why is there no dispatch account as an offbalance sheet account. That way
Dispatch a/c
To inventory a/c can be recorded. Sometimes these inventory causes problems and main in auditing cause it's hectic and prone to errors.