Journal entry for goods given as charity

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on June 22, 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 and is recorded as expense in the books of the business.

Journal entry

When goods are given as charity, charity account is debited and purchases account is credited. The journal entry is given below:
journal-entry-for-charity-img1

Example

On April 20, 2016, the Metro Trading Company gives away merchandise amounting to $350 to a charitable institution.
Required: How would the company record above transaction in its general journal?

Solution

journal-entry-for-charity-img2

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