Rebate Process

[former_member71163]

Dear Experts,

Can anyone explain the below mentioned information....

"The reversal of the accruals is independent from the payment amount of the final settlement. For example, if you accrued $10,000 over a given period, but the customer did not reach their sales goal, you might want to pay only half that amount or nothing at all. No matter what the payment amount is going to be, the total remaining accrued amount for the agreement is reversed."......

My understanding about rebate is every time the sale happens we accrue a percentage on the sale value and that would be stored in an account later if the customer crosses the expected sales figure then the accrued amount will be paid or setttled so here the payment of accrual is called as reversal of accruals is that correct?.....if not correct me with exact meaning of the same...Thanks in advance.......

[former_member184555 · Accepted solution]

Hi

Your understanding is correct for the first part.

As mentioned above, if the accruals are for $10000 and if the cutomer customer is eligilble for claiming the rebate amount, then the busniess settles the rebate amount by way of creating a credit memo. If the customer could not fulfill the requirement and hence not eligible for claiming the amount accrued, the business need not keep the amount in the accruals account and can reverse it to sales revenue account (or to a specific GL account). If the business wishes to pass part of the accruals to customer, say $5000 , then the credit memo will be created for that amount and the balance $5000 will be reversed making the accruals value 'zero'.

Thanks,

Ravi