A sales allowance is recorded as a debit to Accounts Receivable and a credit to Sales Allowances.A sales allowance is recorded as a debit to Sales Allowances and a credit to Accounts Receivable.

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A sales allowance represents a reduction in the selling price granted to the customer due to a quality issue or any other problem with the product. To record a sales allowance, the Accounts Receivable account needs to be reduced since the customer will pay less than the original invoice stated. Therefore, a sales allowance is recorded as a debit to Sales Allowances (contra-revenue account) to reduce the Sales revenue and as a credit to Accounts Receivable.

A Sales Allowance Is Recorded as a Debit to Accounts