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Q5-16RQ

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Horngren'S Financial And Managerial Accounting
Found in: Page 294

Short Answer

When granting a sales allowance is there a return of merchandise inventory from the customer? Describe the journal entry(ies) that would be recorded.

When a business entity grants sales allowance to its customers, it does not receive the merchandise back in such a situation.

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Step by Step Solution

Meaning of Sales Allowance

In accounting, the term “sales allowance” refers to the situation where a customer keeps the defective or damaged goods and, in return, demands a reduction in the selling price of the goods.

Required journal entries

In the case of sales allowance, no merchandise is returned by the customer to the business or seller.

Hence, the journal entry would be:

Date

Accounts and Explanation

Debit ($)

Credit ($)

Sales allowance

XXX

Accounts receivable

XXX

(To record the sales allowances)

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