Hi,
Sometimes we want to sell to customers like this: for every 5 unit purchase, customers got 1 free. Let assume selling price is $10 per unit, and cost is $5.
An accountant wants to do accounting treatment like below:
Dr. Cash: $50
Cr. Sales Revenue: $50 (5 units x $10)
Dr. Deduction from Sales Revenue $5 (cost of 1 unit free)
Dr. Cost of good sold: $25 (5 units x $5)
Cr. Inventory: $30
I do not quite understand why the free unit is valued at cost in the deduction account. Please tell me if it is in accordance with IAS?.
Thanks
Sometimes we want to sell to customers like this: for every 5 unit purchase, customers got 1 free. Let assume selling price is $10 per unit, and cost is $5.
An accountant wants to do accounting treatment like below:
Dr. Cash: $50
Cr. Sales Revenue: $50 (5 units x $10)
Dr. Deduction from Sales Revenue $5 (cost of 1 unit free)
Dr. Cost of good sold: $25 (5 units x $5)
Cr. Inventory: $30
I do not quite understand why the free unit is valued at cost in the deduction account. Please tell me if it is in accordance with IAS?.
Thanks