Hello, I'm confused about something and I hope it's okay to ask for some more help.
I always learned that a contra account to make up net sales is: sales returns and allowances.
I've used this account for any returns.
On my textbook, it's not saying I should use an account that either predicts how many units will be returned or if an estimation isn't reasonable, that I can't recognize revenue until the return policy date is over.
These accounts are:
return liability (which a percentage is taken away from revenue)
or
Rights recovery asset (which a percentage is taken away from COGS)
If there are no reasonable estimates it tells me to replace revenue and cogs all together.
I always learned that a contra account to make up net sales is: sales returns and allowances.
I've used this account for any returns.
On my textbook, it's not saying I should use an account that either predicts how many units will be returned or if an estimation isn't reasonable, that I can't recognize revenue until the return policy date is over.
These accounts are:
return liability (which a percentage is taken away from revenue)
or
Rights recovery asset (which a percentage is taken away from COGS)
If there are no reasonable estimates it tells me to replace revenue and cogs all together.