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For the retail business, how does one account for Credit Card chargebacks in general?

For the retail industry, we have an online store where we sell consumer products. Recently we have been experiencing a heavy volume of credit card chargebacks. Most of the chargebacks were a result of fraudulent activity. The company successfully accepted the online payment, shipped the product to the customers, and ultimately received cash but then got chargebacks. Would these chargebacks be recorded as contra revenue or bad debt expense?

Does anyone have any experience they can share with how to account? Even better if there is an accounting rule that explains this?

Thank you!

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Chargebacks due to fraud IMHO s/b bad debt.

Chargebacks due to short ship, quality or other issues of goods delivered to a legitimate customer should be contra-revenue.

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