A Debit to Sales Returns and Allowances and a Credit

question 30

Multiple Choice

A debit to Sales Returns and Allowances and a credit to Accounts Receivable:

• A) Is not possible; it should be a credit to Sales Returns and Allowances and a debit to Accounts Receivable.
• B) Recognizes that a customer returned merchandise.
• C) Requires a debit memorandum to recognize the customer's return.
• D) Recognizes a cash discount taken by a customer.
• E) All of these answers are correct.

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Definitions:

Opportunity Cost

The amount of income forgone from an alternative to a proposed use of cash or its equivalent.

Differential Revenue

The difference in revenue between two alternative decisions or courses of action.

Course of Action

A plan or strategy that an organization or individual intends to follow to achieve a specific goal.

Alternative

An option or choice that serves as a substitute to a decision or course of action.