Inventory loss/ free samples and bookkeeping

[whitej_d]

Another Noob question I'm afraid!

We give out a lot of free samples from our stock to win new business. What is the correct way to record this in a perpetual inventory system?

Obviously I need to credit the inventory account, but do I still debit the 'cost of goods sold' or should I put it in a marketing account?

Likewise with product expiry, and damage, does it also debit the cost of goods sold, or should it have its own account?

Thanks,

Joe

[David Griffiths]

Free samples and the like should be charged to a marketing account.

Product expiry and damage will ultimately end up in cost of goods sold, so you could put it straight in there. However, there is a case for setting up a separate account for this, so that you can keep an eye on levels of waste. If you don't you might find that inefficiency has crept in. The account total will be added to cost of sales at the year end, but there's no reason that you can't keep it separate for management purposes.