Vendor allowances and rebates

Business financing Business planning

Volume discount

The retailer earns additional discounts when the quantity in terms of items or  money of purchases relating either to specific
products or all products exceeds certain levels. This can also be in the form of prizes and awards.

Advertising allowance

This allowance also is based upon volume of purchases.

Cooperative advertising

A portion of the advertising costs is paid by the franchisee. A franchisor charges each individual franchisee a % of their gross profits and this money is used for advertising of the chain.

Defective merchandise

This allowance is usually based on a % of purchases intended to cover the cost of defective merchandise or the handling costs related to it.

Free merchandise

The vendor may have a promotion for a specific time period during which the retailer receives free merchandise with the purchase of similar merchandise.

Handling allowance

The retailer receives funds from vendors to offset certain costs of handling the merchandise.

Holiday allowance

Vendors may allow retailers to retain holiday merchandise, and reduce the following month‘s billings by the remaining holiday inventory which is then re-billed the following holiday season. This is typically done for all holidays such as Christmas, Easter, and so forth.

Markdown participation

Vendors agree to reimburse all or a portion of product markdowns taken on a specific product, in order to instill confidence in the buyer that the product will perform as predicted.

New store allowance

The vendor may offer free or reduced price merchandise, or non-inventory prize merchandise which would be raffled to store customers, in conjunction with the opening of a new store.

Shelving allowance

The vendor may either provide product shelving or money for the purchase of product shelving. For example, a display case to be strategically placed and used to market the designated product for a certain period of time. The value or money is other income. If the item remains the property of the vendor there is no allowance involved.

Slotting allowance

The vendor desires to have its product displayed in a prominent location to help generate sales. The vendor may offer, or the retailer may demand, payment to secure the space.

Deferred income

Gift certificates and credit vouchers

Retailer may issue gift certificates and credit vouchers. This constitutes other income to be reported when received.

Income from service related activities

Retailer may offer services to support sales.

Promotional allowances

Promotional allowances refer to rebates, promotional advertising, bill backs, allowances, discounts are all deferred income.

Prizes and trips

Retailer may receive prizes or trips from vendors.


Retailers may receive or send out merchandise on consignment. Consignments of merchandise to others to sell are not sales. If goods are shipped on consignment, the retailer has no profit or loss until the consignee sells the merchandise. Merchandise that has been shipped out on consignment is included in the consignor’s inventory until it is sold. Merchandise that is received by the retailer on consignment is not included in the retailer’s inventory. The profit or commission on merchandise consigned to the retailer is included in the retailer‘s income when the merchandise is sold. Retailers often display merchandise at malls, markets and shows.

Sale of accounts receivables

The sale of accounts receivable are to be considered income to a corporation and a dividend to the shareholders.


Most state lotteries provide monthly activity reports to account for a retailer’s lottery sales, commissions and bonuses.

Vending machines

The retailer rents the space to the vendor and receives a monthly payment, or has a contract that pays a percentage of the receipts of the machines.


The value of bartered goods or services is to be recorded as income.