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How to write off stock items given to customers as promotional samples

When you give customers stock items as promotional samples, you still need to account for each item. In this article, we'll outline the steps to write off stock items used for promotional samples. That also includes allowing for the adjustment to stock and moving the Cost of Goods to a Promotional Expense account.

Note:
  • Stock tracking is only available in QuickBooks Online Plus.
  • If the amount you're writing off will significantly affect your gross sales amount, consult your accountant before making this entry.
  • When creating these transactions, be sure that you have the same date for all.

 

Create an expense account to track

Here's how to create an expense account to track:

  1. Select the Gear icon on the Toolbar.

  2. Under Your Company, select Chart of Accounts.

  3. Select New.
  4. For Account type, select Expenses.

  5. For Detail type, select Advertising/Promotional.
  6. Enter the name. (Example: Promotional/Samples-Not for Sale.)
  7. [

    Select Save and close.

 

Create an Invoice for the Item

Here's how to create an invoice for the item:

  1. Select the Plus icon (+) on the Toolbar, then Invoice.

  2. Complete the fields relevant to your invoice.
  3. Select Save.

  • Creating an invoice will reduce the item count in your stock.
  • Under Description and Memo, explain the action.  (Example: To write off Promotional Sample Invoice #)

Run a profit and loss report

Here's how to run a Profit and Loss report in Cash Basis for the date of the Invoice to see what amount of Income and Cost of Goods are needed for the Journal Entry amounts:

  1. From the left menu, select Reports.

  2. Search for and open the Profit and Loss report.
  3. Scroll to the top of the report, then enter the invoice date
  4. For Accounting method, select Cash.
  5. Select Run report.

  6. Identify the amount of Income and Cost of Goods you need to adjust.

 

Create a journal entry

This removes the Income, credits the Customer in Accounts Receivable, and credits Cost of Goods to record the Expense.

  1. Select the Plus icon (+) on the Toolbar, then select Journal Entry under Other.

  2. Enter the date.

On the first Line:

    1. Under Account, select the Sales of Product Income.

    2. Under Debits, enter the amount you are writing off.
    3. Under Description and Memo, type something like "To write off Promotional Sample Invoice # - [insert client name]".

On the second Line:

    1. Under Account, select Cost of Goods Sold (or Cost of Sales).

    2. Under Credits, the amount that the Cost of Goods are for this product.
    3. Under Memo, this should auto-populate.
    4. Under Name, select the customer name.

On the third Line:

    1. Under Account, select Accounts Receivable.

    2. Under Credits, the same amount as the write off.
    3. Under Memo, this should auto-populate.
    4. Under Name, select the customer name.

On the fourth Line:

    1. Under Account, select Promotional/Samples-Not for Sale.
    2. Under Debits, the amount should auto-populate.
    3. Under Memo, this should auto-populate.
    4. Under Name, select the customer name.

Apply the credit note/credit note

Here's how to apply the credit note/credit note:

  1. Select the Plus icon (+) on the Toolbar.

  2. Under Customers, choose Receive Payment.

  3. Select the customer name.
  4. Below the form, all open transactions should be checked. If so, select Save and new. If there are no transactions, select Cancel.

End result sample

The end result should look like this sample:

profit and loss example in QuickBooks

Now you're able to write off stock items given to customers as promotional samples