What is the impact of treating sales returns and allowances as a contra revenue but treating sales discounts and credit card discounts as selling expenses?
A)Gross margin is reduced by sales returns and allowances,sales discounts and credit card discounts
B)Gross margin is reduced by sales returns and allowances but all three accounts cause a decrease in profit from operations
C)Gross margin is reduced by sales returns and allowance but operating profit is only reduced by sales discounts and credit card discounts
D)Gross margin is reduced by sales discounts and credit card discounts but all three accounts cause a decrease in profit from operations.

Question

Quizplus · Accepted Answer

Gross margin is reduced by sales returns and allowances because they are treated as a contra revenue, directly affecting net sales. Sales discounts and credit card discounts, treated as selling expenses, reduce profit from operations but do not affect gross margin.

What Is the Impact of Treating Sales Returns and Allowances