So I have a client who gives away certain products to customers as samples as zero dollar sales orders. But they don’t want those transactions to affect normal COGS account. They don’t like the idea of doing journal entries to move those COGS impacts to another account. They would rather some logic at the transaction level that will change the income account. What is the best way to handle giveaway items at the GL level? They are fine with GL impact of finished goods.

I don’t think you are going to be able to manage the COGS impact without a JE.

That’s what i thought as well. It would seems the reasonable approach would be to have a report of sales and fulfillment transactions for that type and just JE it out.

Is there any preplanning for samples? You could transfer the preplanned stock to a virtual location with ZERO cost. Now when you fulfill out of that location there will effectively be no COGS impact. The question is do you preplan or handle it after the fact?

Good question. Sounds like they want to preplan this so the COGS is taken care of when transactions are made. Can you explain your virtual method a little more. How is this done?

Business process would be the sales teams notifies the ops team that they need x number of samples for x items. The ops team would do an inventory adjustment out of the current warehouse with the appropriate COGS so a write down of item count and asset value occurs. Then they would do an inventory adjustment into the “Sample” location with the items coming in at NO COST. Your average cost for that item in the “Sample” location will be $0.00 so the COGS on the fulfillment will be $0.00.

OK! This sounds good. So I’m looking at an inventory adjustment. You mean to change the Adjustment account? Is there anything to do at the line item level?

for the adjustment out of the main warehouse, you just add the item and the quantity to move. (-25) NS will populate the value. The adjustment account is where the increase or decrease of the asset value goes. Your finance team can tell you what account to use.

OK.

For the adjustment into the new location, you will need to be sure to set the UNIT COST on the item line to 0.

Aha! I get it!

I’m not an accountant, but I would think you would want to track the $ written off for samples so I would probably create an account specifically for this. It should live in the COA in the same place where you write off scrap.

Rebecca you are a star!!!! I really appreciate the hepl on this since accounting is on the bottom of my skill set. LOL

I have a lot of “been there done that” experience with sales teams and samples!

Hey Rebecca. i tested this and it worked! No GL Impact. Thanks so much!