The Sales Returns and Allowances account is classified as
A)an asset account.
B)a contra asset account.
C)a revenue account.
D)a contra revenue account.

Question

Quizplus · Accepted Answer

The Sales Returns and Allowances account is a type of contra revenue account because it represents transactions that reduce the overall revenue earned by the company. When a customer returns a product or receives a discount, the amount of revenue originally recognized on the sale is reduced. This reduction is recorded in the Sales Returns and Allowances account, which is subtracted from the company's total sales revenue to calculate the net sales figure.

The Sales Returns and Allowances Account Is Classified as