Question

Sales ReturnsWhich of the following statements is true relating to the allowance for sales returns?a. Sales returns is treated as an expense in the income statement and, therefore, reduces profit for the period.b. An excess of the amount by which the allowance for sales returns is increased compared with the actual returns for the period indicates the company may have inflated profit for the period.c. The amount by which the allowance for sales returns is reduced during the period is recognized as a reduction of sales for the period, thus reducing profts.d. Increasing the allowance for sales returns by an amount that is less than the actual returns recognized for the period may indicate either the company is attempting to increase profit for the period or its estimates that less of its products will be returned in the future.

Answer 1

Answer:D. Increasing the allowance for sales returns by an amount that is less than the actual returns recognized for the period may indicate either the company is attempting to increase profit for the period or its estimates that less of its products will be returned in the future.

Explanation:Sale returns is a term used in Financial accounting to mean the adjustments made to the sales due to the actual return of a mechandise by a customer who has made purchase of that mechandise previously.

SALES RETURNS ARE USUALLY RECORDED IN THE "SALES RETURN AND ALLOWANCE" RECORDED IN THE INCOME STATEMENT AS A DEDUCTION.

For a successful sales return to be achieved,it must be accompanied with actual product or mechandise return and refund.