USA Defective Merchandise Allowance


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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" ?
 
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DTA93433

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I'd do the latter...... as sales return.
 

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