Question

A client wants to donate five widgets (set up as inventory items) to a charity. In the item setup, the cost is $5 and the sales price is $10. Fifty widgets were originally purchased at $6 per widget.

What is the effect on the General Ledger when this is recorded on a Sales Receipt?

Answer 1

When recording the donation of the five widgets on a Sales Receipt, there will be a decrease in inventory asset and cost of goods sold (COGS) account for $25 ($5 cost per widget x 5 widgets) and an increase in the donation expense account for $25. The sale price of the widgets is not relevant since they are being donated and not sold. The original purchase of the fifty widgets at $6 per widget is not relevant in this transaction.