What is the journal entry for buy 2 get 1 free in a Retail Shop?
AJIN.L.K from Bahrain
AJIN.L.K! Actually this is sales promotion way. When retail shop starts this type of gifts, it will be helpful to grow its sales. As per accounting rule, we have to record the decrease of total quantity of goods and total cost of sold product. Following journal entry will be helpful for this.
Cash/ Bank/ Debtor Account Dr.
Sales Account Cr.
To show the figure in this journal entry is important. There are two way to show the figure of this sales entry. First, you can deem that you have sold 3 items at low price. Second, you can make 1 free as our expense. We should calculate its cost and following entry will be passed.
Free Gift for Sales Promotion Account Dr. (Cost of Free gift)
Purchase Account Cr. ( Cost of free gift)