What effect does crediting sales returns have on income?

Crediting sales returns decreases income because it reflects the revenue that has been reversed due to customers returning previously purchased products. When a company allows returns, the revenue initially recognized from the sale is reduced, leading to a lower overall income. This adjustment is vital in ensuring that the financial statements accurately represent the company's earnings, as it accounts for the reality that not all sales will result in retained income. Thus, by crediting sales returns, the business ensures that its financial records are accurate and reflective of actual revenue received, ultimately resulting in a decrease in net income.