What Is One Possible Reason Why the Account Sales Returns

question 34

Multiple Choice

What is one possible reason why the account Sales Returns and Allowances needs to be established as a contra account?

• A)So that managers can keep a running balance of returned goods in order to be able to sell the damaged goods to the employees of the organization as an incentive
• B)So that managers can produce more goods when goods get returned in order to hit monthly bonus levels
• C)So that managers can make adjustments to the manufacturing process when goods are returned for defective reasons
• D)So that factory foremen can manage when invoices are paid
• E)So that factory foremen can control the amount of credit they grant customers

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Definitions:

Dividend Preference

A feature of preferred stock that gives it priority over common stock in the payment of dividends.

Voting Rights

The entitlement of shareholders to vote on company matters, typically at the annual general meeting, proportional to the number of shares they hold.

Dividends In Arrears

Dividend payments that a company owes to its preferred shareholders but has not yet paid out.

Common Stock Dividend

A portion of a company's earnings distributed to holders of its common shares, often in the form of cash or additional shares.