clandestine wrote: The following information relates to Jay Co's A/R for 1992 Accounts Receivable 1/1/92                        650000 Credit Sales         & amp; nbsp;         & amp; nbsp;         & amp; nbsp;      2700000 Sales Return                                       75000 Accounts Written off         &am p;nb sp;         &am p;nb sp;         40000 Collections from customers        &am p;nb sp;         &am p;nb sp;   2150000 estimated future sales returns12/31/1992        50000 What amount should Jay Report for Accounts REceivable before allowances for sales return at 12/31/1992 options 1200000 1125000 1085000 925000 Option 3 is the answer after subtracting Sales returns. My doubt is when we record an allowance for sales return - why would the sales return of 75000 be deducted from Accounts receivable

An allowance is an "estimate". In that problem, they mentioned "Estimated" Future Sales Returns so that's the one you would disregard. You will not disregard sales returns, just the ones that are estimated.

This is one of those nitpicky questions that most people would get wrong if you don't learn the different terminology. I am still learning this tactic myself.