ALLOWANCE Definition

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ALLOWANCE, within Sales, is a concession granted to customers for unsatisfactory goods or services. Reduces sales because a portion of the sale has not been earned.

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EXISTENCE, in accounting, deals with whether assets or liabilities exist at a given date. For example, management asserts that finished goods inventories in the balance sheet are available for sale.

SEPARATE DETERMINATION CONCEPT holds that each component of any category of assets or liabilities should be valued separately when arriving at a total to be shown in the accounts for that category. For example, the value of each stock item should be calculated individually (at the lower of cost and net realizable value) and these values should then be totaled to give the stock figure which will appear in the accounts. Stock should not be valued at the lower of total cost and total NRV.

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