ananya ravindran (1 Points)
07 December 2021Usually,when goods are given for charity,the entry is
Donation ac. Dr
To Purchases
Why can't we just credit inventory?
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 08 December 2021
we do that right. From
By COS
To Inventory.
This will setoff purchases with inventory and the remaining can be shown as loss due to donations and get that balance subtracted from revenues;
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 09 December 2021
Another way to explain is
There is no other way. Only closing inventory like above is used in profit statement. I'm just wondering myself why is there no dispatch account as an offbalance sheet account. That way
Dispatch a/c
To inventory a/c can be recorded. Sometimes these inventory causes problems and main in auditing cause it's hectic and prone to errors.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 09 December 2021
To think of, we don't have to derecognise purchases.
Donations a/c
To inventory.
But this will impact non gaap measures like gross profit margin ratio
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 09 December 2021
I meant gaap measures. Ebitda is a non gaap one
CAclubindia
