Which of the following best defines 'Net Sales' in financial accounting?

• A. Total sales revenue before any deductions
• B. Total cost of goods sold plus operating expenses
• C. The degree to which a product does what consumers expect it to do
• D. Total sales revenue minus sales returns, allowances, and discounts

Answer: (D)

Verified step by step guidance

1. Understand the concept of 'Net Sales' in financial accounting. Net Sales represents the actual revenue earned from sales after accounting for deductions such as sales returns, allowances, and discounts.
2. Identify the components that affect Net Sales: (1) Total Sales Revenue, (2) Sales Returns, (3) Sales Allowances, and (4) Sales Discounts.
3. Recognize that Total Sales Revenue is the gross amount earned from selling goods or services before any deductions.
4. Subtract Sales Returns (products returned by customers), Sales Allowances (price reductions for defective goods), and Sales Discounts (price reductions for early payments) from Total Sales Revenue to calculate Net Sales.
5. The formula for Net Sales can be expressed as: $\mathrm{Net}\mathrm{Sales}=\mathrm{Total}\mathrm{Sales}\mathrm{Revenue}-\mathrm{Sales}\mathrm{Returns}-\mathrm{Sales}\mathrm{Allowances}-\mathrm{Sales}\mathrm{Discounts}$.