How to Record Expected Price Concessions
Adjusts revenue for the estimated amount of money a company expects to give back to a customer to keep them satisfied.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable | Asset | 5,000.00 | - |
| Revenue | Revenue | - | 4,500.00 |
| Refund Liability | Liability | - | 500.00 |
💡 Accountant's Note
Under ASC 606, revenue is only recognized to the extent it is probable that a significant reversal will not occur. Price concessions are a form of variable consideration.
Practitioner & Systems Framework
💻 ERP Architecture
Can be handled via a 'Variable Consideration' field in the revenue management module that automatically offsets the revenue credit.
⚠️ Audit Flags
History of frequent credits given to customers after invoicing that are not captured at the point of sale.
📄 Required Documentation
Historical concession data, management estimate memo, and communications regarding price negotiations.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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