Sales Discounts and Sales Returns and Allowances normally have what type of balance?

Sales Discounts and Sales Returns and Allowances typically have a debit balance because they are classified as contra-revenue accounts. When sales discounts are offered to customers, they reduce the total revenue earned by the company. Similarly, when a product is returned or an allowance is given, this also decreases the revenue recorded.

The nature of these accounts is to reflect reductions in sales, and the accounting for these transactions results in debit entries. For example, when a sales return is processed, the entry would debit the Sales Returns and Allowances account, which increases its balance and reflects the decrease in total sales revenue for the period. This treatment is essential for accurately presenting the company's income on financial statements, ensuring that only net revenue is reported.