How to Account for Product Given Away — Free Samples, Gifts and Write-Offs

Last updated: April 2026

Generously handing out samples or demos is a time-honored way to charm potential customers — but those freebies don’t just disappear from a business perspective. They affect your inventory, your COGS, and potentially your tax filings.

If you’re not recording them properly, you could end up with inventory records that don’t match your physical stock, COGS figures that are understated, and a nasty surprise come tax time.

In this article, we’ll cover the accounting treatment for product giveaways — free samples, promotional items, demo units, and write-offs — so you can stay on top of your books without losing sleep over it.

What Counts as a Product Giveaway?

A product giveaway is any inventory that leaves your shelves without generating revenue — samples, demos, gifts, and write-offs all fall into this category.

Common examples include:

• Free samples — cosmetics, candles, soap, or food products given out at markets, expos, or sent to potential customers
• Demo units — sports equipment, tools, or furniture models placed at retail locations for customers to try
• Promotional items — branded merchandise, gift-with-purchase items, or seasonal giveaways used in marketing campaigns
• Event giveaways — product handed out at trade shows, craft fairs, or pop-ups to generate buzz
• Influencer or reviewer samples — units sent for review or unboxing content, common in beauty and gift niches
• Write-offs — damaged, expired, or unsellable stock that needs to be removed from your inventory records

Each situation is slightly different, but the accounting principle is the same: the product has left your inventory, and that movement needs to be recorded.

Your turn: make a quick list of all the ways product leaves your hands without a sale attached to it. You might be surprised how long the list gets.

Why Giveaway Accounting Matters

Poorly tracked giveaways cause two specific problems that compound over time.

First, your inventory count drifts. Every unrecorded sample or write-off leaves a ghost unit on your books — stock that looks like it’s there but isn’t. Over months, this adds up to a significant gap between your reported inventory value and your actual stock.

Second, your COGS gets understated. Every unit you give away has a real cost — the materials, labour, and overhead that went into making it. If that cost never makes it into your books, your apparent profit looks higher than it actually is. That’s fine for morale, but it creates problems when you’re pricing your products or filing taxes.

The good news is that both problems are easy to solve once you have a system. It’s just a matter of recording the movement — and choosing the right category.

The Accounting Treatment for Giveaways

Here’s the part that catches most makers off guard. When you give product away, it doesn’t just disappear — it becomes an expense.

Every unit of product you give away has a cost attached to it. That cost is what you spent to produce or purchase it — your cost of goods sold. When you hand that item to a customer for free, you’re incurring that cost without any corresponding revenue.

This matters for two reasons:

1. Inventory accuracy — your records need to reflect that the stock is gone, or your on-hand counts will be wrong
2. Expense classification — the cost needs to appear in the right category on your books so your financial statements are accurate

In most cases, you can deduct the cost of giveaways as a business expense. Samples, promotional items, and marketing giveaways are generally deductible. Damaged stock write-offs are treated as inventory losses. (Tax rules vary by jurisdiction — always confirm with your accountant.)

Samples vs. Write-offs vs. Personal Use

These three situations look similar on the surface but get recorded differently:

Promotional samples and giveaways — Product given away intentionally as part of marketing. Record as a marketing or promotional expense. The cost comes out of your inventory value and gets categorised as a business expense.

Write-offs (damaged or unsellable stock) — Product that can no longer be sold due to damage, expiry, or defect. This is recorded as an inventory write-off or loss. It reduces your inventory value and shows up as a separate line in your books — not as a marketing cost.

Personal use — Product taken from your business inventory for your own use. This is NOT a business expense. It needs to be removed from inventory and recorded as a personal drawing. Keeping these separate from business expenses is important, particularly at tax time.

Mixing these up is a very common bookkeeping mistake — especially when a damaged item ends up recorded as a “giveaway” and incorrectly claimed as a marketing deduction.

How Craftybase Handles Product Giveaways

Craftybase is built around the reality that small makers don’t just sell products — they also give them away, write them off, and occasionally help themselves to their own stock.

When you need to remove an item from your inventory for any of these reasons, you create an inventory adjustment. Craftybase lets you assign a specific reason to each adjustment, which is what keeps your records clean and your expense categories meaningful.

Adjustment categories include:

• Promotional / Sample — for items given away as marketing samples or giveaways
• Write Off — for damaged, expired, or unsellable stock being removed from records
• Personal Use — for product taken from inventory for your own use (non-deductible)
• Damaged — specifically for damage-related losses

Each adjustment automatically updates your inventory count. The cost of the adjustment is tracked against the appropriate category — so at year end, you can pull a report showing exactly what was given away, written off, or taken for personal use, and what it all cost you.

To log a giveaway or write-off in Craftybase:

1. Navigate to the product or material you’re removing
2. Create a new inventory adjustment
3. Select the appropriate category (Promotional, Write Off, Personal Use, etc.)
4. Enter the quantity removed
5. Add a note if needed — event name, reason for write-off, recipient

The adjustment records the quantity change and logs the cost against the category. Your reports stay accurate without any additional data entry, and you have a clear paper trail if you ever need to justify the deduction.

How to Account for Giveaways in QuickBooks

If you’re using QuickBooks alongside an inventory tracker, here’s how to handle giveaways on the QuickBooks side:

1. Create a new discount item: go to List → Item List → New and select “Discount” as the item type
2. Name it something descriptive (“Promotional Sample”, “Marketing Giveaway”)
3. Set the discount to 100% — this reflects the zero-revenue nature of the transaction
4. Apply it to a sales transaction to record the giveaway

For write-offs of damaged or expired stock, you’ll need a journal entry that reduces your inventory asset account and records the write-off as a loss. For a detailed walkthrough, see this Intuit article.

One thing to keep in mind: QuickBooks doesn’t connect to your inventory tracking the way a dedicated system does. You may find yourself doing double data entry — once in QuickBooks, once in your inventory tracker — which is worth factoring into your workflow planning.

Frequently Asked Questions

The bottom line? Giveaways are a legitimate and often smart business strategy — but they only work in your favour if your books reflect what’s actually happening. Recording each giveaway, write-off, and personal use adjustment as it happens keeps your inventory accurate, your COGS reliable, and your year-end reports much less stressful.

If you’re managing this in a spreadsheet right now, you already know how easy it is for things to fall through the cracks. A dedicated system like Craftybase makes the process much less painful — adjustments update your inventory in real time, costs are calculated from your existing recipes, and reports are always ready when you need them.