Which of the following statements regarding sales returns and allowances is not true?
A)A reduction in the selling price because of damaged merchandise is included in sales returns and allowances.
B)Sales returns and allowances do not have an impact on gross profit.
C)Sales returns and allowances are recorded in a separate contra-revenue account.
D)Sales returns and allowances are rarely disclosed in published financial statements.
E)Sales returns and allowances are closed to the Income Summary account.

Question

Quizplus · Accepted Answer

Sales returns and allowances reduce the total sales revenue, which directly impacts the gross profit by lowering it. Therefore, the statement that they do not impact gross profit is not true.

Which of the Following Statements Regarding Sales Returns and Allowances