Sales Returns and Allowances are contra revenue accounts because they reduce that total amount of sales. [Sales-Sales returns and allowances=Net sales]. They are reported on the income statement.
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Sales Returns and Allowances is a contra income account.
net sales
Sales 563400less:sales return 18690Net Sales 544710
Gross sales is the total value of sales before any deductions. Net sales is what is left of the gross sales after deductions and expenses, including discounts, returns and allowances.
--> another term for Statement of Earnings is Income Statement --> in income statement, you deduct the Sales Return & Allowances from the Gross Sales to come up with Net Sales --> in presentation purposes, usually it is only the Net Sales account that is shown