Why Sales Returns And Sales Allowances Are Not Recorded, Posted Or Debited To The Sales Account

Why Sales Returns and Allowances Are Not Debited In Sales Ledger' s Account

Sales Returns and Sales Allowances are not debited to the Sales Account in order to provide the better information about Contra Revenue Accounts to the management. So these contra revenue accounts are recorded in sales returns and sales allowances ledgers’ accounts respectively.

The management of the company can easily and clearly understand what is the amount of sales and what are the amounts of sales returns and sales allowances.

The information obtained from ledger accounts of sales returns and sales allowances, as separate from sales ledger’s account, helps the management to improve the quality of products and to take into account the necessary steps to sole customer problems, etc., so that these problems should be surely decreased in future.

In Income Statement, Sales returns and allowances are deducted from sales to reduce it as these have balances opposite to sales account, i.e., these have normal debit balance while sales has normal credit balance.