Gifts and Samples

This Direct Expenses code records costs directly tied to producing sales, relating to gifts and samples. As an expense account, it normally carries a debit balance: debit entries increase the balance and credit entries decrease it.

Real-world examples

FMCG / consumer goods (product samples)

An FMCG skincare brand hands out trial-size samples of a new product at events and in magazines to let people try it before buying. Genuine product samples are excluded from the VAT "business gifts" rule regardless of value, so there's no output VAT to account for when they're given away — input VAT on buying in the sample stock is still reclaimed as normal. A £960 (£800 net) batch of sample stock is a debit of £800 to 6202 (Gifts and Samples), a debit of £160 to 2201, and a credit of £960 to 2100.

B2B / professional services (client gifts)

A B2B consultancy sends a Christmas hamper costing £84 (£70 net, £14 VAT) to a top client. Input VAT is reclaimed as normal on the purchase — a debit of £70 to 6202, a debit of £14 to 2201, and a credit of £84 to 2100. But because this is a genuine gift rather than a sample, and £70 is above the £50-in-a-12-month-period threshold for gifts to a single recipient, output VAT of £14 must also be accounted for on the cost when the gift is handed over — effectively cancelling out the input VAT just reclaimed. Keeping any one client's gifts under £50 a year avoids this extra charge entirely, which is why many firms cap corporate gifting at that level deliberately.

Commonly confused with

Because code 6201 (Advertising) sits right next to this one in Direct Expenses, it's a common mis-posting target. Code 6202 is specifically for gifts and samples, while 6201 covers advertising — similar in nature, but keeping them separate is what makes the direct expenses section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

Posting to the wrong cost code here won't change total cost of sales, but it will distort gross margin analysis by category, making it harder to see which input costs are actually rising.

Other codes in Direct Expenses