The effect of a customer refund and allowance is a reduction in sales revenue and a decrease in cash or accounts receivable.

Question

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A customer refund or allowance is essentially giving money back to the customer, resulting in a reduction in sales revenue and a decrease in cash or accounts receivable. This is because the company is essentially reversing the sale, and therefore will no longer have the cash or accounts receivable that they originally received from the customer.

The Effect of a Customer Refund and Allowance Is a Reduction