Journal Entry for Goods Given as Charity

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on October 13, 2021

A business organization may give some goods as charity to a charitable institution or directly to people in need of charity.

Goods given away as charity reduce the merchandise without any consideration. They are recorded as an expense in the books of the business.

Journal Entry

When goods are given as charity, the charity account is debited and the purchases account is credited. The journal entry is given below:Charity Journal Entry

Example

On 20 April 2016, the Metro Trading Company gives away merchandise amounting to $350 to a charitable institution.

Required: How would the company record this transaction in its general journal?

Solution

Charity Journal Entry Solution

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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