Why this is mistaken
Model the transaction as linked components: revenue for expected nonreturns, a refund liability, and an asset for the right to recover goods, adjusted for expected recovery costs and loss in value. Update the estimates each period.
Where to watch
When this mistake may appear
- Record sales net of returns.
- The customer has 60 days to return it.
Check your work
Your work may contain this mistake if:
- Posts only a revenue reserve.
- Leaves inventory unchanged.
- Does not update expected returns and recoverability.