My employer is in vegetable oil. It is our normal practice to give our products to friends of the company and staff as incentives. End of every month, we value the closing stock. How do we account for PR?
How do I account for product gift for PR?
Answers
In the past, we charged this as either sales expense (given to customers) or a cost to the department where individuals received product.
If your employer is in vegetable oil, I would get him out, quickly, and get him into a shower!!! (Sorry; couldn't resist it.)
Seriously, Patrick Dunne is correct. I would only add that if the dollar value of oil given to employees is in any way substantial, you might want to get a private ruling from the IRS to ensure they will not treat the oil as "wages"
Generally, IRS ignores gifts to employees of de minimis value; however, if the value of the oil is substantial, they may treat it as wages (i.e., payment in kind) and assess you for failing to withhold.
On the face of it, I would assume the amounts given away out of stock are so immaterial as to be adequately accounted for as part of inventory slippage.
But, if they are not, then the other answers are correct. The value of those that go to customers is charged off to wherever your company charges promotional items and employee gifts should be included in the compensation categories and subjected to full income taxes.
But, I've got to believe that we are talking about immaterial values here?
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Human Capital