I want to set up an account for cash refunds when goods are returned. A returned single item might lead to a refund in four figures, so I need to be able to track these occurrences. The item, meanwhile, goses back into stock and will eventually be sold to another customer.
The question: since each refund can be traced directly to a single sale, should it be treated as a direct cost, or as an overhead? (Previously, I would have regarded a refund as an overhead).
A refund for returned goods would be a reversal of the the sale so a direct cost.
If not treated in this way then surely revenue would be overstated for the period.
hope that I didn't misunderstand the question,
kind regards,
Shaun.
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Shaun
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Thanks for that. It's what I had come round to thinking in this case (the goods were returned because the customer was physically unable to use them). Not having been 100% sure, though, it's good to have an independent view.
