Question

Goods distributed as free sample would be __________________.

• A. Debited to Advertisement A/c and credited to Purchase A/c.
• B. Debited to Trading A/c and Credited to Profit and loss A/c
• C. Credited to sale A/c and Debited to purchase A/c
• D. Credited to Trading A/c and Debited to Drawing A/c

Answer 1

The correct option is A Debited to Advertisement A/c and credited to Purchase A/c.

Goods distributed as free samples are products given away by a business usually for promotional reasons.

The goods distributed as free samples do not have a sales value and therefore cannot be recorded in the accounting records as sales.

The free product samples do however have a cost which needs to be removed from the cost of sales account and recorded as an expense. The expense account used will depend on the reason the goods were distributed as free samples and might include for example sales and marketing, promotion, advertising, charity or simply a free samples expense account.

Journal Entry :-

Advertisement A/c Dr.

To Purchase A/c