BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an expense account.
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a revenue account.
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a contra expense account.
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a contra revenue account.
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Detailed explanation-1: -In the sales revenue section of an income statement, the sales returns and allowances account is subtracted from sales because these accounts have the opposite effect on net income. Therefore, sales returns and allowances is considered a contra‐revenue account, which normally has a debit balance.
Detailed explanation-2: -Sales discounts and sales returns & allowances are contra accounts to Sales and have a normal debit balance. For a sales allowance only the first journal entry, to record the reduction in the amount due, is required since the merchandise was not returned and added back into the inventory of the seller.
Detailed explanation-3: -Examples of Contra Revenue Accounts Sales Returns and Allowances. Sales Discounts.
Detailed explanation-4: -Contra Revenue Account Sales returns, sales allowance and sale discounts are different examples of contra revenue accounts. Contra accounts such as these have a debit balance and are deducted from the total amount of a company’s revenue.
Detailed explanation-5: -The sales allowance account is a contra account, since it offsets gross sales. The result of the pairing of the gross sales and sales allowance accounts is net sales. There is normally a debit balance in the sales allowance account.