MANAGEMENT

Detailed explanation-1: -To grant a customer a sales return, the seller credits Sales Returns and Allowances. A company’s unadjusted balance in Merchandise Inventory will usually not agree with the actual amount of inventory on hand at year-end.

Detailed explanation-2: -A sales allowance is where a seller will grant a reduction in the price charge due to problems with the merchandise but the buyer will keep the merchandise. In contrast, a sales return is where the customer is given a refund and the customer gives the goods back to the seller.

Detailed explanation-3: -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.

Detailed explanation-4: -Answer and Explanation: The correct answer is false. The sales returns and allowances and the Sales discount are not expense accounts, but both contra-revenue account, which would reduce the revenue account to calculate for net revenue.

Detailed explanation-5: -Accounting for Sales Returns and Allowances Both of these accounts are contra accounts, which means that they offset gross sales. The natural balance in these accounts is a debit, which is the reverse of the natural credit balance in the gross sales account.