Home › CA Foundation › accounting › Final Accounts of Sole Proprietors › Goods costing ₹20,000 distributed as free samples:
Goods costing ₹20,000 distributed as free samples:
AAdd to purchases account
BLess from purchases account
CTreated as sales account
DCapitalised to advertisement
Answer & Solution
Correct answer: D. Capitalised to advertisement
1. Distribution of own goods as samples is a marketing expense.
2. Credit purchases (reduce cost of goods sold) by ₹20,000.
3. Debit advertisement / sales promotion (P&L expense) by ₹20,000.
4. Net effect: reclassification from purchases to advertisement.
_Source: ICAI BoS Foundation Paper 1, Ch 7 U1 "Final Accounts", §1.4 free samples_
Related questions
Goods worth ₹8,000 destroyed by fire; ₹6,000 recovered from insurance. The loss debited toTrial balance: capital ₹2,00,000; drawings ₹15,000; net profit for year ₹35,000. Closing cBills receivable shown as ₹20,000 in trial balance; ₹5,000 discounted but not yet matured Interest on capital is treated as:Goods costing ₹10,000 used by proprietor personally:Closing stock includes goods sent on consignment ₹15,000 (sold not yet). They should be:Manager's commission is 10% of net profit after such commission. Net profit before commissDrawings of ₹15,000 by proprietor are: