It is typically a dollar figure companies write off for theft, spoilage, obsolete or damaged inventory.
Provisions for sales returns and allowances. When the Company recognizes revenue from the sale of its products, an estimate of various sales returns and allowances is recorded which reduces product sales and accounts receivable. When the Company recognizes revenue from the sale of its products, an estimate of sales returns and allowances (SRA) is recorded which reduces product sales and accounts receivable. These adjustments include estimates for chargebacks, rebates, cash discounts and returns and other When that happens, the company writes off those items -- meaning, it takes them off the books and eats the cost. Say a company with $200,000 in gross inventory and an inventory reserve of $2,000 decides it has to write off $500 in inventory. First, it reduces the value of its gross inventory by $500, to $199,500. Then it also adjusts the reserve by $500, to $1,500.  Defined. An inventory provision is typically a dollar figure companies write off for theft, spoilage, obsolete or damaged inventory. Companies use these provisions to ensure the inventory figures on the accounting books accurately reflect the physical inventory products in the company. Inventory often ages and goes out of date if a company is unable to sell the products. For example, grocery stores may use provisions to account for products that go bad if not sold by a certain date. These provisions result in an expense and lower income. This excerpt taken from the WPI 10-K filed Mar 1, 2007. Provisions for Sales Returns and Allowances. As customary in the pharmaceutical industry, the Companys gross product sales are subject to a variety of deductions in arriving at reported net product sales. When the Company recognizes revenue from the sale of its products, an estimate of sales returns and allowances (SRA) is recorded which reduces product sales and accounts receivable. These adjustments include estimates for chargebacks, rebates, cash discounts and returns and other allowances. These excerpts taken from the WPI 10-K filed Feb 23, 2009. Revenue and Provision for Sales Returns and Allowances. As customary in the pharmaceutical industry, our gross product sales are subject to a variety of deductions in arriving at reported net product sales. Returns and Other Allowances  Our provision for returns and other allowances include returns, pricing adjustments, promotional allowances and billback adjustments. Consistent with industry practice, we maintain a return policy that allows our customers to return product for credit. Function. Inventory often ages and goes out of date if a company is unable to sell the products. For example, grocery stores may use provisions to account for products that go bad if not sold by a certain date. These provisions result in an expense and lower income. These adjustments include estimates for chargebacks, rebates, returns, and other sales allowances. These provisions are estimated based on historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with wholesale and indirect customers. When the Company recognizes revenue from the sale of its products, an estimate of sales returns and allowances (SRA) is recorded which reduces product sales and accounts receivable. These adjustments include estimates for chargebacks, rebates, cash discounts and returns and other DEFINITION of 'Inventory Write-Off'. An accounting term for the formal recognition that a portion of a company's inventory no longer has value. An inventory write-off may be handled in the company's books by charging it to the cost of goods sold or by offsetting the obsolete inventory allowance. Most inventory write-offs are small, annual expenses; a large inventory write-off (such as one caused by a warehouse fire) may be categorized as a non-recurring loss For some companies, inventory is an important part of the accounting process because it represents a large portion of their assets. The original value of inventory may not remain constant, however, and companies can use inventory provisions to cover possible losses. Inventory often ages and goes out of date if a company is unable to sell the products. For example, grocery stores may use provisions to account for products that go bad if not sold by a certain date. These provisions result in an expense and lower income. Sales Return. Definition: A sales return is merchandise sent back by a buyer to the seller, usually for one of the following reasons: 1  Excess quantity shipped. 2  Excess quantity ordered. 3  Defective goods. 4  Goods shipped too late. 5  Product specifications are incorrect. 6  Wrong items shipped. 
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what is a provision for inventory returns