An event was canceled, and the customer was given a full refund. Since the event has not happened the money was in a deposit account on the balance sheet. I know I will clear that activity. If I am going to "refund" the customer for more then they have paid would I reduce revenue or book it as an expense? The "refund" is for a hotel room that the customer booked for the event. If I paid for the room at the time of the event I would book it as an expense. Therefore, I feel this should be an expense as it is not a refund for my service/good.
Refund recorded as expense or revenue
Answers
In the sales revenue section of an income statement, the sales returns and allowances account is subtracted from sales because these accounts have the opposite effect on net income. Therefore, sales returns and allowances is considered a contra‐revenue account, which normally has a debit balance.
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Accounting