The distribution of goods as free samples is not uncommon among businesses. Free samples are often used as part of a company's marketing and consumer outreach programs. The major purposes of the distribution of goods as free samples include: The outflow of merchandise that happens due to the distribution of free samples cannot be recorded as a sale. This is because no monetary compensation is received for the distribution of goods as free samples. Instead, providing free samples to clients is viewed as an advertising expense. Therefore, it is debited to the advertisement expense account. The journal entry for a free sample involves debiting the "advertisement (or free sample) account" and crediting the "purchases account." The above journal entry increases advertisement expense and reduces the purchase amount. The Fine Trading Company aims to introduce new products to the local market. For marketing purposes, it distributes free samples costing $3,500 on 15 March 2016. Required: Prepare a journal entry to record the distribution of goods as free samples.
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Journal Entry for Distribution of Goods as Free Samples FAQs
The distribution of goods as free samples is not uncommon among businesses. Free samples are often used as part of a company’s marketing and consumer outreach programs.
Introducing a new and existing product in the market, Introducing a feature upgrade to an existing product, increasing the market share of a particular product and receiving feedback from product users
The journal entry for a free sample involves debiting the “advertisement (or free sample) account” and crediting the “purchases account.”
Advertising expenses are costs incurred to disseminate information. This can be done through various types of marketing activities, including sending direct mailers, setting up billboards, broadcasting television advertisements while free samples are often given away during trade shows or distributed in newspapers or magazines.
The free samples are available to everyone. However, you must be a resident of the United States to receive the products.
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