alleryStart learning →Returns and allowances record what?
AMerchandise customers sent back
BMerchandise still held in stock
CMerchandise bought on credit
DMerchandise shipped to branches
Answer & Solution
Correct answer: A. Merchandise customers sent back
1. Returns and allowances is the dollar amount of merchandise returned by customers.
2. Customers return goods because they did not like the product or because it was damaged or defective.
3. Merchandise still held is inventory, a balance sheet item, so it never appears as a deduction from sales.
4. Along with sales discounts, returns and allowances reduce gross sales to net sales.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 14 "Using Financial Information and Accounting", section 14.5 The Income Statement_
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