Question

Goods costing Rs.10,000 distributed as free samples were credited to sales account. What will be the rectifying entry:

• A. Free Samples Account to be debited and purchases account to be credited.
• B. Sales Account to be debited and free sample account to be credited.
• C. Sales Account to be debited and purchases Account to be credited.
• D. Sales Account to be debited and suspense Account credited .

Answer 1

Answer: (C)

Sales Account to be debited and purchases Account to be credited.

When goods are purchased or brought into the business purchase account is debited. Similarly when goods go out of the business for any reason other than sales, purchases account is credited.

The journal for goods distributed as free samples is -

Advertisement Expense A/c Dr. 10000

To Purchases A/c 10000

Here sales account is wrongly credited instead of purchases account, so the incorrect entry has to be cancelled and actual entry has to be passed. Here Advertisement Expense account is rightly debited, so no changes will be made to it.

Since sales account is wrongly credited, it will be debited to cancel the entry and purchases account will be credited which was omitted. The rectification entry is -

Sales A/c Dr 10000

To Purchases A/c 10000