The sales returns and sales allowances accounts are classified as

1 answer:

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These two Sales Revenue accounts (the sales returns and sales allowances) are classified as <em>Contra accounts.</em> They have debit balances unlike the Sales Revenue account.

The purpose of their creation is to maintain the Sales Revenue account at its gross amount for measure purposes.

The Sales Returns account is the General Ledger account for recording goods returned by customers. It reduces the Accounts Receivable account, which is credited with Sales Returns.

The Sales Allowances account records allowances granted to customers for defective goods, which reduce their balances.

Thus, the two sales accounts are contra accounts and they have debit balances.

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