alleryGoods 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_
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