Question

s. You note during the review of sales, that a rebate was issued for the 2018 Income Tax Game to encourage sales. 3X,000 (enter the last digit of your student number) games were sold. Customers can mail in their receipt and receive a $1 rebate per game. It is estimated that 60% of customers will send in the rebate. The rebate expires on January 31, 2019. To date, 8,000 customers have sent in the rebate and $16,000 has been refunded. Without any direction, the accounting clerk debited Miscellaneous Selling Expense and credited Cash for the $16,000. The management of Accounting Creations would prefer to have this type of expense in a separate account (Rebate Expense) so they can properly analyze for future ideas.

Answer 1

Decision of management accountant is better. It will help in future ideas. Because management can know easily that how much they spent on rebate and how much sale has increased comparitively. If further rebate can increase sales then it will be beneficial to continue granting rebate.

On other part, if managemnt allow to post this expense under the head of selling expense then it will not be posible segregate the rebate expenses and other selling expenses. So future analysis will not be posible for management regarding sales and rebate relationship.