The Sales Returns and Allowances account balance should be reported as a deduction from the Sales account balance because it is a contra revenue account.

Question

Quizplus · Accepted Answer

The Sales Returns and Allowances account is a contra revenue account and has a debit balance, which should be subtracted from the credit balance of the Sales account to arrive at the net sales figure. This is because sales returns and allowances are deductions from the original sales amount.

The Sales Returns and Allowances Account Balance Should Be Reported