Question

Customer refunds payable is a liability account for estimated refunds and allowances that will be paid or granted customers in the future. What is the purpose of customer refunds payable?

1) To record the estimated refunds and allowances that will be paid or granted to customers in the future
2) To record the actual refunds and allowances that have been paid or granted to customers
3) To record the estimated refunds and allowances that have been paid or granted to customers
4) To record the estimated refunds and allowances that will be paid or granted to suppliers

Answer 1

Customer refunds payable is a liability account that records the estimated refunds and allowances that will be paid or granted to customers in the future.

Step-by-step explanation:

The purpose of customer refunds payable is to record the estimated refunds and allowances that will be paid or granted to customers in the future. It is a liability account that represents the company's obligation to provide refunds or allowances to customers. By recording these estimated amounts, a company can monitor the potential financial impact of future refunds and allowances on its financial statements.