1. Discuss the accounting standards and concepts that dictate the proper accounting of sales returns.
Revenue recognition is one of the major problems that businesses normally face as there are many ways of recognizing revenues. They may include during production, when production is finished, at the point of sale, when cash is collected, and finally after the sale has been made. Most companies recognize revenues at the point of sale where there is transfer of ownership of the product from the seller to the buyer. But at certain points, the sales are normally done with a right of return due to several reasons. This leads to the creation of sales returns which basically reduces the benefits of the sales process as the seller will be forced to refund the equivalent amount returned. According to SFAS 48, a specific process is used in recognizing revenues with the right of return.
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