Sales returns and allowances is a contra revenue account with a normal debit balance used to record returns from and allowances to customers. The account, therefore, has a debit balance that is opposite the credit balance of the sales account. To reverse the return’s related revenue, you have to debit your sales returns and allowances account by the amount of revenue generated by the original sale. Then, you have to credit your accounts receivable or cash account by the same figure. A seller will then have to record a sales return by debiting a Sales Return and Allowances account and crediting the Accounts Receivable account in a case where the sale is made on credit. The credit to the accounts receivable account will reduce the outstanding amount of accounts receivable.<\/p>\n

How to Record a Sales Revenue Journal Entry<\/h2>\n

The journal entries for sales returns from XYZ Co. are as follows. Instead of debiting the sales returns account, companies will debit the sales allowances account. Like other contra accounts, the contra revenue account goes against revenues in the income statement.<\/p>\n

Are the Accounts Receivable Current or Non-assets?<\/h2>\n

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Maria Trading Company always sells goods to its customers on account. The company collects sales tax at 7% on all goods sold by it and periodically sends the collected amount of tax to a tax-collecting agency. Sales returns occur when a customer does not accept goods and returns them to the seller for a full refund or credit. A sales allowance occurs when a customer chooses to accept such goods but at a reduced price. So when the company\u2019s warehouse physically receives the goods, the inventory account will be debited to increase the asset, and the cost of goods sold will be credited.<\/p>\n