Discuss the accounting for sales allowances and how they relate to the concept of variable consideration.

Sales price is defined as the amount of money that each buyer must pay for the acquisition of any goods or service. Such price is reduced by various means such as cash and trade discounts.

Sales return and allowance fall under the category of contra-revenue. When a company sells a product, then the accounts receivables and sales revenue are adjusted to the expected amount of sales return—maintaining such an account helps a business entity in the identification of problems associated with poor quality of merchandise and inefficiency of the business entity in executing the orders.

It is related to variable consideration because the management estimates it and it affects the final price of the business transaction.