MANAGEMENT

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: -Accounting for Purchase Returns Purchases will normally have a debit balance since it represents additions to the inventory, an asset. The contra account purchases returns and allowances will have a credit balance to offset it.

Detailed explanation-3: -Sales is a revenue account so has a normal credit balance. To close Sales, it must be debited with a corresponding credit to the income summary. Sales Discounts and Sales Returns and Allowances are both contra revenue accounts so each has a normal debit balance.

Detailed explanation-4: -Answer: False The Sales Returns and Allowances account is used to record the amount of customer returns and allowances due to factors such as product defects or product damage.