Definition
A handling allowance is a financial incentive or discount provided by a manufacturer to a wholesaler, distributor, or retailer for managing extra tasks related to the handling of the manufacturer’s products. This might include tasks such as redeeming discount coupons, managing specific packaging requirements, or conducting additional inventory checks.
Examples
- Grocery Stores and Coupons: A grocery store may receive a handling allowance from a manufacturer for redeeming discount coupons provided by the manufacturer. This is to account for the extra labor and administrative work required by the store’s staff to process these coupons.
- Special Packaging Requirements: A wholesale distributor might get a handling allowance for dealing with items that require unique packaging or storage conditions, such as refrigerated goods or fragile items needing special care.
- Return Processing: Retailers handling returns of a manufacturer’s product might be given a handling allowance as compensation for the administrative tasks involved in processing and returning the items.
- Seasonal Products: A retailer might receive a handling allowance for seasonal products that require special display setups or storage techniques.
Frequently Asked Questions (FAQs)
What is the purpose of a handling allowance?
The primary purpose of a handling allowance is to compensate wholesalers, distributors, or retailers for the additional work or costs associated with special handling of the manufacturer’s products.
Who is eligible for a handling allowance?
Wholesalers, distributors, and retailers who undertake additional handling responsibilities as specified by the manufacturer are eligible for a handling allowance.
How is a handling allowance calculated?
The handling allowance is generally calculated based on the additional costs or labor incurred by the wholesaler, distributor, or retailer due to the extra handling requirements. This can vary depending on the terms agreed upon with the manufacturer.
Can a handling allowance be applied to all types of products?
No, handling allowances are typically applied to products that have specific handling requirements such as special packaging, storage, or administrative tasks like coupon redemption.
Is a handling allowance always monetary?
While handling allowances are usually monetary, they can also take other forms such as additional product discounts, credits, or even free products.
How are handling allowances recorded in accounting?
Handling allowances are recorded as reductions in the cost of inventory or as discounts received in the financial records of the wholesaler, distributor, or retailer.
Related Terms
- Trade Discount: A reduction in the listed price of goods or services offered by a manufacturer or wholesaler to a retailer or distributor.
- Rebate: A partial refund given by the manufacturer to the buyer or retailer after the purchase of a product.
- Coupon: A voucher entitling the holder to a discount off a particular product.
- Logistics: The management of the flow of goods between the point of origin and the point of consumption to meet customer requirements.
Online References
- Investopedia: Handling Allowance Definition
- Wikipedia: Discount (finance)
- Khan Academy: Introduction to Discounting
Suggested Books
- “Financial and Managerial Accounting” by Jan Williams, Susan Haka, Mark Bettner, and Joseph Carcello
- “Accounting for Dummies” by John A. Tracy
- “Cost Accounting: A Managerial Emphasis” by Charles T. Horngren, Srikant M. Datar, Madhav V. Rajan
- “Retail Management” by Barry Berman and Joel R. Evans
Fundamentals of Handling Allowance: Business Basics Quiz
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