Where does the Sales Returns and Allowances account go under

Where does the “Sales Returns and Allowances” account go under the Accounting Equation?
What does this tell you in regards to the company’s revenue and the qualify or products/services being sold?

Solution

In the sales revenue section of an income statement, the sales returns and allowances account is deducted/reduced from sales because such an account has the opposite effect on net income. Thus, the sales returns and allowances is considered to be a separate contrarevenue account, which usually has a debit balance.

The balances in the contra –revenue account depict the sales returns and are monitored by the management to as a percentage of overall sales. A high return level indicates that there is a problem either with the products or their packaging, or pricing or with the sales process. It merits a close scrutiny to locate the problem so that the deficiency may be removed.