What is debtors allowance?
submitted by Mahlatse

lerato

Reductions made on a debtor's account because of the goods that are returned or overcharged

Pleasance

A sum of money paid regularly to a person to meet the needs or expenses of the debtor.

dforce

when goods are sold on credit, sometimes the debtor is not satisfied with part or all of the goods . Businesses that want to keep good customer relations will provide a facility for goods to be returned. This is Debtor's Allowance.

Lyneez

The value (selling price) of goods bought on credit by a debtor and which is now returned by the debtor

Sheceena Joseph

It is used for summarising those return/rebate on goods or services previously recorded in the debtors journal.

Kelly Emilia Mugonera

A debtor's allowance is when a debtor return's damaged good's, and sometimes get a discount.

Mbalentle

The right of debtors to return goods that they are not satisfied with, goods that might be damaged, expired, etc

sipheyena

an agreement in which a buyer receives something of value now and agrees to repay the seller at a later date

Emmanuel s Mnguni

Payment made over a returned item to the debtors, might be damaged , expired, or over charge. It result in reducing the Cost of sales and affect the gross profit

Terry

You do your best to estimate how much you may have to write off. You can calculate debtors allowance with decent accuracy, based on your past data.

jared

Debtors allowance is money set aside for product returns. No business will have 100% satisfaction, and sometimes things break. Setting money aside for this is a great plan.

You might not need to fully refund the purchase price. You may only need to replace a part, for example. You also have the option of offering a discount, which is still an unexpected loss. Debtors allowance covers these situations.

If a customer returns damaged goods, the business would issue a debtor's allowance, which reduces the amount the customer owes. Now there's a deficit because the inventory is no longer usable, and the purchase price was refunded. So you'd debit "Debtors Allowances" and credit Accounts Receivable, which decreases the receivable balance. It's a normal part of credit sales management, and it satisfies disappointed customers.