Why don't we credit inventory for goods given for charity?

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.

we do that right. From 

By COS 

To Inventory. 

This will setoff purchases with inventory and the remaining can be shown as loss due to donations and get that balance subtracted from revenues;

Another way to explain is 

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.

 

 

 

 

 

To think of, we don't have to derecognise purchases. 

Donations a/c 

To inventory.

But this will impact non gaap measures like gross profit margin ratio

 

I meant gaap measures. Ebitda is a non gaap one

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