Gershwin Wallcovering Inc. shipped the wrong shade of paint to a customer. The customer agreed to keep the paint upon being offered a 15% price reduction. Gershwin would record this reduction by crediting Accounts Receivable and debiting:

Sales Allowance

Explanation:

The Journal Entry will be as follow

Dr. Sales Allowance

Cr. Accounts Receivable

The reduction will be recorded as the deduction in the sale. It is recorded in the Sales Allowance account which is an contra revenue / sales account, This account is adjusted in the sales to calculate the net sales value. On the other hand the account receivable which already recorded are reduced by passing an credit entry in it.

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