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Write off inventory items given to customers as promotional samples

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

Note:
  • Inventory 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 of them.

Create an expense account to track

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

  1. Go to Settings ⚙️.
  2. Select Chart of Accounts.
  3. Select New.
  4. For Account type, select Expenses.
  5. For Detail type, select Advertising/Promotional.
  6. Enter the name. (ex. 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 Create ⨁, then Invoice.
  2. Complete the fields relevant to your invoice.
  3. Select Save.
  • Creating an invoice will reduce the item count in your inventory.
  • Under Description and Memo, explain the action. (ex. 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. Select Reports.
  2. Search for and open the Profit and Loss report.
  3. 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 Create ⨁, then Journal Entry.
  2. Enter the date.

On the first Line:

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

On the third Line:

  1. Under Account, select Accounts Receivable.
  2. Under Credits, enter the same amount as the write off.
  3. The Memo field should auto-populate.
  4. Under Name, select the customer name.

On the fourth Line:

  1. Under Account, select Promotional/SamplesAdvertising/Promotional.
  2. The Debits amount should auto-populate.
  3. The Memo field should auto-populate.
  4. Under Name, select the customer name.
  5. Select Save.

Apply the adjustment note

Here's how to apply the adjustment note:

  1. Select Create ⨁.
  2. Select Receive Payment.
  3. Select the customer name.
  4. All open transactions should be listed. Check the box beside the one(s) you want, then 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 inventory items given to customers as promotional samples.

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