Which of the following best describes revenue in the context of net sales?

• A. Is the amount of money remaining after all expenses have been subtracted from sales.
• B. Is the cash received from customers after deducting only the cost of goods sold.
• C. Is the profit earned from selling goods or services.
• D. Is the total amount of money earned from sales before deducting returns, allowances, and discounts.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of revenue in financial accounting. Revenue refers to the total amount of money earned from sales of goods or services before any deductions such as returns, allowances, or discounts.
2. Step 2: Differentiate revenue from other financial terms. For example, net income is the amount remaining after all expenses have been subtracted from revenue, while profit is the earnings after deducting costs and expenses.
3. Step 3: Analyze the options provided in the problem. Each option describes a different financial concept, but only one aligns with the definition of revenue.
4. Step 4: Identify the correct description of revenue. Revenue is the total amount earned from sales before any deductions, which matches the last option provided in the problem.
5. Step 5: Confirm your understanding by reviewing the definition of net sales. Net sales are calculated by subtracting returns, allowances, and discounts from total revenue, further emphasizing that revenue is the gross amount earned before these deductions.