[Solved] A Sales Returns And Allowances Account Is Not Debited If A Customer:

The correct answer of this MCQ is (c), as utilization of a prompt payment incentive from seller to buyer gives him a Sales Discount, so he bought goods / merchandise at a discounted price and the seller sold goods at Discount to encourage buyer to buy and hence increased the Sales of his business for the accounting period. So, in this case, Sales Returns and Sales Allowances are not created and hence not debited in the journal entry while Sales Discount is debited which lowers the cost of goods or merchandise i.e., sales discount is a Contra Revenue Account which is deducted from Gross Sales on Income Statement.

(a). If the customer returns the defective merchandise, then we record Sales Returns account (which is debited) and which lowers the sales.

(b). If the seller gives allowance to customer to purchase merchandise of inferior / lower quality, then this also lowers the value of sales as we debited Sales Allowances Account.

(d). If the goods are not delivered according to specifications i.e., order 5 tables but delivered 7 tables or size of 114 X 42 tables are delivered instead of size of 102 X 40, then sales returns account is debited which the sales amount.