Journal Entries for Goods Given as Charity, Free Samples, Drawings, and Personal Use

Some journal entries look confusing because the word “goods” appears, but no sale has taken place.

Goods may be given as charity. They may be distributed as free samples. The owner may take goods home. Goods may also be used for a personal purpose.

In all these cases, goods are going out of the business, but the business is not receiving money from a customer.

That is the main idea.

If there is no sale, do not record Sales A/c. Instead, ask one simple question:

Why did the goods leave the business?

The answer to that question decides which account will be debited.

Once this rule becomes clear, these entries stop feeling like four separate tricks. They become one simple pattern.

First Understand the Core Logic

In Class 11 journal entries, goods bought for resale are normally recorded through Purchases A/c.

When those goods are sold, Sales A/c is credited.

But charity, free samples, drawings, and personal use are different. The goods leave the business, but the business does not earn sale proceeds.

So the credit side should not be Sales A/c.

The credit side reduces the goods available for business use. In school-level journal entries, this is usually shown by crediting Purchases A/c.

The debit side records the purpose:

Situation	Why goods left the business	Account debited
Goods given as charity	Donation or help	Charity A/c
Goods distributed as free samples	Promotion or advertising	Advertisement A/c
Goods withdrawn by owner	Owner’s personal withdrawal	Drawings A/c
Goods used for proprietor’s personal purpose	Personal use, not business use	Drawings A/c

Why Sales Account Is Not Used

This is the mistake students make most often.

If goods costing Rs. 5,000 are given as charity, it may feel natural to think, “Goods went out, so it must be sales.”

But a sale needs consideration. The business gives goods to a customer and receives cash, bank, or a debtor in return.

In charity, there is no customer paying for the goods.

In free samples, the business is spending on promotion.

In drawings, the owner is taking goods for personal use.

So there is no sales revenue.

If Sales A/c is credited, the business will show revenue that it never earned. That gives a wrong picture of profit.

The One Pattern Behind All Four Entries

Use this structure:

Reason A/c Dr.
    To Purchases A/c

Now replace “Reason” with the correct account.

Transaction wording	Entry idea
Goods given as charity	Charity A/c Dr. To Purchases A/c
Goods distributed as free samples	Advertisement A/c Dr. To Purchases A/c
Goods withdrawn by proprietor for personal use	Drawings A/c Dr. To Purchases A/c
Goods taken by owner for household use	Drawings A/c Dr. To Purchases A/c

The credit side stays similar because goods are leaving the business stock.

The debit side changes because the purpose changes.

Case 1: Goods Given as Charity

Goods given as charity are goods donated by the business without receiving payment.

The business is giving away goods for a charitable purpose. This is treated as an expense for the business.

So Charity A/c is debited.

Purchases A/c is credited because goods that were available for sale have gone out of the business.

Format

Particulars	Debit (Rs.)	Credit (Rs.)
Charity A/c Dr.	Amount
To Purchases A/c		Amount

Narration: Being goods given as charity.

Solved Example

Transaction:

Goods costing Rs. 8,000 were given as charity.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Charity A/c Dr.	8,000
To Purchases A/c		8,000

Narration: Being goods costing Rs. 8,000 given as charity.

Notice the word “costing”. The amount is Rs. 8,000 because that is the cost of goods to the business.

Case 2: Goods Distributed as Free Samples

Free samples are goods distributed to attract customers, introduce a product, or promote sales.

The business is not selling these goods at that moment. It is using them for advertising.

So Advertisement A/c is debited.

Purchases A/c is credited because goods have gone out of the business.

Format

Particulars	Debit (Rs.)	Credit (Rs.)
Advertisement A/c Dr.	Amount
To Purchases A/c		Amount

Narration: Being goods distributed as free samples.

Solved Example

Transaction:

Goods costing Rs. 5,500 were distributed as free samples.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Advertisement A/c Dr.	5,500
To Purchases A/c		5,500

Narration: Being goods costing Rs. 5,500 distributed as free samples.

Case 3: Goods Withdrawn by Owner as Drawings

Drawings mean cash, goods, or any other asset taken by the owner from the business for personal use.

The owner and the business are treated separately in Accountancy.

So when the owner takes goods from the business, it is not a business expense. It is also not a sale.

It is drawings.

Drawings A/c is debited because the owner’s claim on the business is reduced.

Purchases A/c is credited because goods are removed from the business stock.

Format

Particulars	Debit (Rs.)	Credit (Rs.)
Drawings A/c Dr.	Amount
To Purchases A/c		Amount

Narration: Being goods withdrawn by proprietor for personal use.

Solved Example

Transaction:

Proprietor withdrew goods costing Rs. 3,200 for personal use.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Drawings A/c Dr.	3,200
To Purchases A/c		3,200

Narration: Being goods costing Rs. 3,200 withdrawn by proprietor for personal use.

This is the same logic as cash drawings. The only difference is that goods are withdrawn instead of cash.

Case 4: Goods Used for Personal Purpose

Sometimes the question does not use the word “drawings”. It may say:

• Goods taken by proprietor for home use
• Goods used by owner for family function
• Goods consumed by proprietor for personal purpose
• Goods taken by owner for household use

All these phrases point to the same treatment.

The goods have gone to the owner personally, not to the business.

So Drawings A/c is debited.

Purchases A/c is credited.

Solved Example

Transaction:

Goods costing Rs. 6,000 were used by the proprietor for a family function.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Drawings A/c Dr.	6,000
To Purchases A/c		6,000

Narration: Being goods costing Rs. 6,000 used by proprietor for personal purpose.

What If the Question Gives Cost Price and Selling Price?

This is an important exam-style confusion.

Suppose the question says:

Goods costing Rs. 10,000 were given as charity. Selling price Rs. 12,000.

Which amount should be used?

Use cost price, not selling price.

Why?

Because no sale has happened. The business is not earning Rs. 12,000. The goods are simply leaving the business.

The entry will be:

Particulars	Debit (Rs.)	Credit (Rs.)
Charity A/c Dr.	10,000
To Purchases A/c		10,000

Narration: Being goods costing Rs. 10,000 given as charity.

The selling price is extra information unless the question clearly asks for something else.

What If the Question Only Says “Goods Worth Rs. 4,000”?

In many school questions, the phrase “goods worth Rs. 4,000” is treated as the value to be recorded.

So if the transaction says:

Goods worth Rs. 4,000 distributed as free samples.

The entry will be:

Particulars	Debit (Rs.)	Credit (Rs.)
Advertisement A/c Dr.	4,000
To Purchases A/c		4,000

Narration: Being goods worth Rs. 4,000 distributed as free samples.

Do not delay the entry by wondering whether this is cost or selling price unless the question gives both values.

Charity vs Free Samples vs Drawings: How to Identify Quickly

The wording of the transaction usually gives the answer.

Words in question	Meaning	Account debited
Charity, donated, given away to poor people, relief fund	Goods given for help or donation	Charity A/c
Free samples, samples distributed, goods for advertisement, sales promotion	Goods used for promotion	Advertisement A/c
Proprietor withdrew, owner took, personal use, household use	Goods taken by owner personally	Drawings A/c

The debit account comes from the purpose.

The credit account comes from the goods going out.

Full Practice Set

Let us practise the entries together.

Example 1: Goods Given as Charity

Transaction:

Goods worth Rs. 2,500 given as charity.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Charity A/c Dr.	2,500
To Purchases A/c		2,500

Narration: Being goods given as charity.

Example 2: Goods Distributed as Samples

Transaction:

Goods costing Rs. 7,000 distributed as free samples.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Advertisement A/c Dr.	7,000
To Purchases A/c		7,000

Narration: Being goods costing Rs. 7,000 distributed as free samples.

Example 3: Goods Withdrawn by Owner

Transaction:

Proprietor withdrew goods worth Rs. 4,800 for personal use.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Drawings A/c Dr.	4,800
To Purchases A/c		4,800

Narration: Being goods withdrawn by proprietor for personal use.

Example 4: Cash and Goods Withdrawn Together

Transaction:

Proprietor withdrew cash Rs. 5,000 and goods worth Rs. 3,000 for personal use.

Here, both cash and goods are taken by the owner. The total drawings are Rs. 8,000.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Drawings A/c Dr.	8,000
To Cash A/c		5,000
To Purchases A/c		3,000

Narration: Being cash and goods withdrawn by proprietor for personal use.

This is a compound entry because one drawings amount is split between cash and goods.

Example 5: Cost Price and Selling Price Given

Transaction:

Goods costing Rs. 9,000, selling price Rs. 11,000, were distributed as free samples.

Entry:

Particulars	Debit (Rs.)	Credit (Rs.)
Advertisement A/c Dr.	9,000
To Purchases A/c		9,000

Narration: Being goods costing Rs. 9,000 distributed as free samples.

The entry uses Rs. 9,000 because the goods are not sold.

How These Entries Affect Final Accounts

Even if your current chapter is journal entries, it helps to understand what happens later.

When goods are given as charity or free samples, they are shown as an expense in the Profit and Loss Account.

They are also deducted from purchases because they are no longer available for sale.

When goods are withdrawn by the owner, they are treated as drawings. Drawings are deducted from capital.

They are also deducted from purchases because the goods have left the business.

This is why the journal entry has two sides:

Side	What it does
Debit side	Records charity, advertisement, or drawings
Credit side	Reduces goods available through Purchases A/c

Common Mistakes Students Should Avoid

Mistake 1: Crediting Sales A/c

Do not credit Sales A/c when goods are given away without payment.

There is no sale.

Mistake 2: Debiting Purchases A/c Again

Purchases A/c was already debited when goods were bought.

When goods leave the business without sale, Purchases A/c is credited to reduce the goods available for sale.

Mistake 3: Treating Owner’s Personal Use as Business Expense

If the proprietor takes goods home, do not write Household Expense A/c or General Expense A/c.

The correct account is Drawings A/c because the owner is taking value out of the business.

Mistake 4: Using Selling Price When Cost Is Given

If goods are not sold, do not use selling price just because it appears in the question.

Use cost price for the entry unless the question gives a special instruction.

Mistake 5: Forgetting Narration

Narration is small but useful. It explains why the goods left the business.

Good narrations are simple:

• Being goods given as charity.
• Being goods distributed as free samples.
• Being goods withdrawn by proprietor for personal use.

A Simple Memory Trick

Think of Purchases A/c as a basket of goods meant for sale.

If goods leave the basket without being sold, ask:

Where did they go?

If they went to charity, debit Charity A/c.

If they went to customers as samples, debit Advertisement A/c.

If they went to the owner personally, debit Drawings A/c.

Then credit Purchases A/c because the basket has become smaller.

Quick Revision Table

Situation	Debit	Credit	Why
Goods given as charity	Charity A/c	Purchases A/c	Charity is an expense and goods leave the business
Goods distributed as free samples	Advertisement A/c	Purchases A/c	Free samples are for promotion
Goods withdrawn by proprietor	Drawings A/c	Purchases A/c	Owner has taken goods personally
Cash and goods withdrawn by proprietor	Drawings A/c	Cash A/c and Purchases A/c	Total personal withdrawal is recorded as drawings
Goods given away when cost and selling price are both given	Reason account at cost	Purchases A/c at cost	There is no sale, so profit is not recorded

Final Takeaway

These entries become easy when you stop memorising them separately.

Goods given as charity, goods distributed as free samples, and goods withdrawn for personal use all follow one common idea:

Goods have gone out, but no sale has taken place.

So the entry should record the reason for the outflow and reduce Purchases A/c.

If you can identify the reason correctly, the entry almost writes itself.

Frequently Asked Questions

What is the journal entry for goods given as charity?

The entry is Charity A/c Dr. To Purchases A/c. Charity A/c is debited because it is an expense. Purchases A/c is credited because goods have gone out of the business without sale.

What is the journal entry for goods distributed as free samples?

The entry is Advertisement A/c Dr. To Purchases A/c. Free samples are treated as an advertising or promotion expense, not as sales.

What is the journal entry for goods withdrawn by proprietor for personal use?

The entry is Drawings A/c Dr. To Purchases A/c. The proprietor has taken goods personally, so the withdrawal is treated as drawings.

Should goods given as charity be recorded at cost price or selling price?

Use cost price when cost is given. If goods are not sold, no profit is earned, so selling price is normally not used for the journal entry.

Why is Purchases A/c credited in these entries?

Purchases A/c is credited because goods originally meant for sale have gone out of the business without being sold. The credit reduces the goods available for normal business sale.

Are goods given as charity treated as sales?

No. Goods given as charity are not sales because the business does not receive payment or create a debtor. They are treated as an expense.

Are free samples an expense?

Yes. Free samples are usually treated as an advertisement or sales promotion expense because the business gives them away to promote its goods.

Is personal use by the owner a business expense?

No. Personal use by the owner is drawings. It reduces the owner’s capital and should not be treated as a normal business expense.