# How to account 'Free Of Cost' Items?

Hi There.
Im struggling with this since a few days.

Scenario -

Every few months, the distributor from a company comes up with schemes, where if i purchase 20 units of an item, I get 3 items free of cost.

So say 20 units of Item A costing 500 each, gives me 20+3 units of the item for 10,000.

Now when I account for this in Manager,
If I create a purchase invoice of 23 items at 500 each item the total invoice goes 11500.
If I input the total Amount as 10000 for 20 items, the value per item averages to 434.75
To add to it, the 3 free items come with no receipt or bill or voucherâ€¦ nothing.
Im given a bill of 20 items costing 500 each.

Either of these is wrong as per my accounting advisor.
The 3 free items should retain me 1500 profit and should reflect in Net Profit.

How Do I account this correctly?
Any clues ?

You can do this several different ways. Using your example:

• Enter 23 items on one line. For the `Unit price` field, enter the calculation 10000/23. Manager will calculate the effective unit price of 434.7826. All 23 items will be in inventory at their proper average cost.
• Enter 23 items on one line with a unit price of 500. Check the box for Discount and choose Exact amount. On the appropriate line item, enter 1500 as the discount.
• Enter two lines, one for 20 items at 500, the other for 3 items at 0.

That may be, but you still received the items. If you want them to be in your inventory, you must put them on the purchase transaction. In many industries shipped amounts are different from what is billed. This is common for bulk shipments. The accounting effect is a small adjustment of average cost. A note on the purchase transaction (whether purchase invoice or payment form) will document the reason for the difference between your records and the supplierâ€™s invoice.

Eventually this will be true, but not until the items are sold. Until then, their discounted value will show up as an asset in Inventory on hand. When you sell them at your normal price, their addition to Inventory - cost will be less because of the discount. So your net profit will be higher at that point.

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