A business organization may give some goods as charity to a charitable institution or directly to people in need of charity. Goods given away as charity reduce the merchandise without any consideration. They are recorded as an expense in the books of the business. When goods are given as charity, the charity account is debited and the purchases account is credited. The journal entry is given below: On 20 April 2016, the Metro Trading Company gives away merchandise amounting to $350 to a charitable institution. Required: How would the company record this transaction in its general journal?Journal Entry
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Solution
Journal Entry for Goods Given as Charity FAQs
Goods given away as charity reduce the merchandise without any consideration. They are recorded as an expense in the books of the business.
The journal, also known as the General Journal, is involved in the first phase of accounting because all transactions are recorded in it, originally in chronological order.
The things which are manufactured for selling purpose or bought for reselling purpose are known as goods or merchandise.
In accounting, purchases do not mean buying anything but it has special meaning. When saleable goods or merchandise are bought in a business these are called purchases.
Any event that changes the financial position of a business concern and that must be recorded in the books of accounts is called a “transaction“.
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