Accounting journal for Sample giveaway to customer

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arnob216
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Joined: 30 Nov 2020, 17:49

Accounting journal for Sample giveaway to customer

Post by arnob216 »

How will a Manufacturing company record giving away $20,000 free sample to customer? I understand it is a promotional expense. So, journal can be:

Promotional expense DR 20,000
Purchase CR 20,000

The problem is that if the same materials were actually purchased at $15,000, does it create any gap of $ 5000? (20,000-15,000)? Is there any better way to record this?
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Marek Muc
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Re: Accounting journal for Sample giveaway to customer

Post by Marek Muc »

How do you know they are worth $20,000 if you purchased them for $15,000? Do you also sell them?
arnob216
Posts: 8
Joined: 30 Nov 2020, 17:49

Re: Accounting journal for Sample giveaway to customer

Post by arnob216 »

The issue is solved actually. It does not matter what is the sales price is. The transaction would be recorded at cost price.

So, promotional expense dr 15,000
Inventory/purchase cr 15000
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Marek Muc
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Re: Accounting journal for Sample giveaway to customer

Post by Marek Muc »

That's right. If it's purchased as a promo material, then you should expense it at delivery date, at least under IFRS:
https://ifrscommunity.com/knowledge-bas ... activities
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