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Financial losses for quality issues: How does a management accountant classify?

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If a restaurant gives a free meal to a customer or gives a discount to regular customers, how do you account for these transactions? How would you classify these and report them in the company's financial statements?

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Solution Summary

This 172 word discussion explains what account should be used and how the management accountant will use this account to make sure transactions are authorized for discounts and alert managers of potential issues.

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A price adjustment after the sale is a "sales allowance." This differs from a sales return or a early pay cash discount. It is a reduction in the sales price as a concession to the customer, usually because of something that did not go as planned. It can also be a price adjustment for special customer categories, for example with volume ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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