How do you record rebates in financial statements and why AR decrease?

Rebates are typically recorded as a reduction in revenue or as a separate expense in the financial statements, depending on the accounting policy adopted by the company. When a rebate is issued, accounts receivable (AR) decreases because the amount owed by customers is reduced, reflecting the rebate given. This decrease in AR aligns with the matching principle in accounting, ensuring that expenses related to the rebates are recognized in the same period as the revenue they affect.