Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 7 - Cash and Receivables - Review and Practice - Questions - Page 362: 7

Answer

A variable consideration refers to a future event that has the potential of influencing a good or service’s price and the balance of the accounts receivable by extension. Sales allowances are granted in cases of mistakes with shipments, low-quality merchandise, delivery-related problems and inefficiencies with fulfilment of orders. When sales allowances are granted, the amount expected from the accounts receivable decreases.

Work Step by Step

A variable consideration refers to a future event that has the potential of influencing a good or service’s price and the balance of the accounts receivable by extension. Sales allowances are granted in cases of mistakes with shipments, low-quality merchandise, delivery-related problems and inefficiencies with fulfilment of orders. When sales allowances are granted, the amount expected from the accounts receivable decreases.
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