Which of the following is NOT deducted from gross sales to calculate net sales?

• A. Sales Allowances
• B. Sales Returns
• C. Cost of Goods Sold
• D. Sales Discounts

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of gross sales and net sales. Gross sales represent the total revenue generated from sales before any deductions. Net sales are calculated by subtracting specific deductions from gross sales.
2. Step 2: Identify the common deductions from gross sales to calculate net sales. These typically include Sales Returns (products returned by customers), Sales Allowances (price reductions for defective or damaged goods), and Sales Discounts (reductions for early payment or promotional discounts).
3. Step 3: Recognize that Cost of Goods Sold (COGS) is not a deduction from gross sales to calculate net sales. COGS is a separate expense that represents the direct costs of producing goods sold by a company, and it is subtracted later when calculating gross profit.
4. Step 4: Compare the listed items in the problem. Sales Allowances, Sales Returns, and Sales Discounts are all deductions from gross sales to calculate net sales, while Cost of Goods Sold is not.
5. Step 5: Conclude that the correct answer is Cost of Goods Sold, as it is not part of the deductions used to calculate net sales.