Sample and FOC

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Manoj Kumar (Querist)
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29 April 2008 Hi,
If some company has given some material as sample and some as FOC with main item sold, then how to give accounting effect.Whether any compliance under Income tax , or VAT need? Plz give reference if available in any accounting standard, Guidance Note or any other pronouncement.

CA. Yayati Tyagi

CA. Yayati Tyagi (Expert)
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30 April 2008 One way is to not give any accounting effect for this as ultimately this will automatically reflect in inventory valuation (inventory will be reduced and valued accordingly.

But if you want to give effect, it may be like this:
In case of manufacturing concern, credit the Trading a/c by value of goods (a/c name may be "Samples distributed") and debit P&L with same amount and may be with same name.
In case of trading concern, instead of crediting Trading a/c , Purchases a/c may be credited. Rest treatment is same.
You see, there is no net impact on profits by these entries, that impact will come from inventory valuation.
I think there is no such formal guidance on this subject by any body in India (quite possible I am wrong).