Recognizing sales returns only when merchandise is returned could result in an overstatement of income in the period of the related sale.

Question

Quizplus · Accepted Answer

Recognizing sales returns only when merchandise is returned could result in an overstatement of income in the period of the related sale, as it could artificially inflate the revenue for that period. It is important to recognize sales returns and allowances in the same period that the related sale was made to accurately reflect the company's financial position.

Recognizing Sales Returns Only When Merchandise Is Returned Could Result