Which of the following statements is not correct about sales returns and allowances?
A) Sales returns and allowances can provide useful information about the quality of inventory and the possibility of unsatisfied customers.
B) Sales returns and allowances are recorded in a separate contra-revenue account.
C) Sales returns and allowances are always disclosed in external financial statements.
D) Sales returns and allowance are subtracted to determine net sales.

Question

Quizplus · Accepted Answer

Sales returns and allowances are not required to be separately disclosed in external financial statements under generally accepted accounting principles (GAAP). They are reflected in the gross sales line item and the contra-revenue account is typically presented separately.

Which of the Following Statements Is Not Correct About Sales