How to account for if we are issuing 3 items for the price of 2

Question

Is it as a discount given under turnover or a cost under S&D?

Comments

If we offer discount to some customer as said in scenarios (selling 3 for price of 2 ) . The discount given will be presented as contra revenue figure in Income Statement. It means it reduce the revenue by amount of discount given.

Below will be the presentation in Statement of Comprehensive income

Gross sales                               Less: sales discounts  (Discount given)               *** sales

***,***                                      (***,***)                  ***,***

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Thanks Bilal!

But some colleagues are of the view that this is a promotion in the nature of "buy 2 and get 1 free".

Hence they are of the view that the cost of the third item should be accounted under promotional expenses rather than COS.

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Hi, why not become a member of the forum to help others while getting help from others!

Answer 1

You can book the sales as a bundle, Companies does apportion the cost of three products and make the deal which looks like buy 2 get one 1. Margins are adjusted across three products this is the same strategy used my Metro and other hyperMarkets.

Comments

Yes, but where would the cost get accounted? Cost of all three items under COS(Considering we have given an additional discount)

 or Cost of two items under COS & one cost of one under promotional expenses(considering one item as a free issue; buy two & get one free)