The main difference between accounting for rebate and cash discount coupons is:
A)The latter is not treated as an expense.
B)Only the former creates a contingent liability when issued.
C)The expense for the latter is deferred until redemption of the coupon.
D)There are no significant differences in accounting between the two.

Question

Quizplus · Accepted Answer

For cash discount coupons, the expense is deferred until redemption because it is uncertain whether or not the customer will actually use the coupon. However, for rebates, a liability is actually recorded at the time of issuance because the customer has met certain criteria (such as purchasing a certain amount) and is entitled to a payment back from the company. Therefore, there is a significant difference in accounting for the two.

The Main Difference Between Accounting for Rebate and Cash Discount