As a vendor to retail chain stores we agreed to provide a "defective merchandise allowance" with some of our customers. The customer is allowed to deduct this from payment of their invoices without needing any proof/documentation of merchandise actually being defective. Which is the correct way to record this:
Increase Expenses by Increasing "Damaged Merchandise - Cost of Goods Sold", or
Reduce Sales Revenue by Increasing "Sales Returns and Allowances" ?
Increase Expenses by Increasing "Damaged Merchandise - Cost of Goods Sold", or
Reduce Sales Revenue by Increasing "Sales Returns and Allowances" ?