One way to record inventory items you donate or give away as a sample/promotion is to change the item’s sales price to $0. This accounts for the decrease in inventory, without affecting sales. However, if you run financial statements on a cash basis, QuickBooks misstates your income (on the Profit & Loss) and Accounts Receivable (on the Balance Sheet) causing the Cash Basis Profit & Loss and Balance Sheet reports to be incorrect.
NOTE: This is not a problem if you run your reports on Accrual basis.
Follow these steps to avoid this problem and keep track of items you give away.
Step 1: Create a new income account for samples/promotions
- From the Lists menu, click Chart of Accounts.
- Click Account > New.
- Select Income as the account type.
- Click Continue.
- Name the account Samples/Promotions (or a name that explains why you’re giving the items away).
- Click Save & Close.
Step 2: Create a new item for samples/promotions
- From the Lists menu, click Item List.
- Click Item > New.
- Select Other Charge as the type.
- Name the item Sample/Promo (or a name that explains why you’re giving the items away).
- Write a description like donation/sample/promotion.
- From the Account drop down, choose the Samples/Promotions account you created in Step 1.
- Click OK.
Step 3: Create the invoice to record samples/promotions
- From the Customers menu, click Create Invoices.
- Complete the invoice as usual. Add the items you’re giving away at the price you usually charge. Do NOT change the sales price to $0.
- On the line below the items you’re giving away, add the Sample/Promo item you created in Step 2.
- Enter the amount of the Samples/Promo item(s) as a negative amount that equals the total price of the items you’re giving away. For example, if the total sales amount of the free item(s) is $30.00, enter the Promo item amount as -$30.00.Note: If all the items on an invoice are giveaways, the invoice will be marked as paid and have a zero balance.
- Once you're done with the invoice, click Save & Close.