Accounting for Sales Incentives Offered to Customers
In order to move product and drive sales, companies often engage in various forms of sales incentives. These may take many forms but the most common are coupons, rebates, discounts on future purchases, and point and loyalty programs. Each of the aforementioned sales incentives will be explained and the accounting illustrated with an emphasis on their impact on revenue recognition.
Coupons and Rebates
Coupons (buy one get one free) and rebates ($30 mail in rebate off the price of a printer) are used by the recipient of the offer in a single transaction. The estimated cost of a coupon or rebate is recognized at the later of the date at which the related sale is recorded by the company or the ...