Theoretically, the amount of estimated future returns and allowances on credit sales should be recorded during the period of the sale so as not to overstate sales and ending accounts receivable.In practice, these estimates are rarely recorded because
A)the amount of such returns and allowances tends to fluctuate too greatly from period to period
B)there is too much uncertainty surrounding such estimates
C)such estimates are not allowed according to generally accepted accounting principles
D)the amount of such returns and allowances is usually not material

Question

Quizplus · Accepted Answer

The amount of estimated future returns and allowances on credit sales is usually not material, and therefore, the estimates are often not recorded. Furthermore, companies may choose to wait until the actual returns and allowances occur to record them and avoid potential errors in estimation.

Theoretically, the Amount of Estimated Future Returns and Allowances on Credit